Bihar Election What To Trade

Note: Update to Bihar elections results and profit booking is here:

http://www.theoptioncourse.com/india-vix-dropped-book-profits/

Bihar elections are going on. This may impact the options volatility and we can benefit from it.

At today’s close INDIA VIX is 19.48 up by 1.60, or 8.95% up from previous close.

You can see it here:

http://www.moneycontrol.com/indian-indices/india-vix-36.html

I assume this will increase till this Friday, 6th of November, 2015. I think will go up to 21 or 22 and then fall. Since counting is on Sunday, 8th of November, 2015 – VIX will fall drastically on Monday by the time results are out. From Monday it will keep falling until it stabilizes to 16-17 levels.

Trading The VIX

Some of my readers trade the VIX itself. Well if you don’t know VIX can be traded in India. You can trade only Futures by the way as of now. So if you are risk averse please do not trade VIX as it cannot be hedged directly. Well it can be hedged with equity cash holdings or options of Index – but its out of scope of this article.

You can find about trading the India VIX here and here.

VIX trading if done right can make a lot of money, but let me warn you its very risky as well. One lot is valued approx 10 lakhs and you can see how it fluctuates in one day. 8% fluctuation means you make or lose 80,000 in one day on one lot only. So think before you start thinking of trading the VIX. 🙂

Right now I don’t think retail traders are trading it, but the institutional investors and high net worth individuals do. If you are one of them please tell about your experiences in the comments section.

What to Trade Tomorrow till Bihar Election Results Are Out?

If you have bought my course:

Trade the directional strategy on Nifty. Remember the option prices will not decrease soon so even if the Future direction is wrong – the options will make more than Future losses. And of course if you are correct on Futures you make money anyways. 🙂

When to exit: Any time you are making a 3% profit on margin blocked. Number of days to stay is NOT important. But the maximum time you can be in the trade is until markets closes for trading on Monday – 9th of November, 2015.

After that VIX will start dropping which is not good for the directional strategy. Trade like a pro – exit and look for another opportunity.

If you have not bought my course:

Well why should I tell you? 🙂 Just joking. The easiest trade when VIX is increasing is to buy options. Well buy both the Calls and Puts. Buy tomorrow 3rd November and exit on Friday 9th November. Hope for a movement and VIX not dropping. Well VIX will not drop at least till the results are out. Sometimes it may drop slightly after the exit poll survey results are out by the media. But that may happen only on Friday.

When to exit? When you are making a profit of 10% on margin blocked. Why not at 3% which I always advise? Well the trades and the objective of the trades are different. Basically buyers are losers – so when there is a chance to make – take at least 10% home of margin blocked.

Of course you have to close your trades on Friday whether you make a profit or not as after that its almost guaranteed that VIX will drop and you can lose a lot of money. Trade with a plan and the plan is to exit the trade when VIX has started to drop. Believe me after that even if a movement comes – your trade will still make a loss as VIX will drop and the theta will also take a toll on the premiums – remember 5-6 days would have already passed. Options love to lose value as fast as they can. So enter tomorrow and exit this Friday.

Important note: When buying options risk management is very important as 100% of the margin money can be lost. Though chances of losing all money is next to nil as you are staying in the trade only till Friday – still see how much worth of options you can buy. Do not buy more than that.

What to Trade On Monday After The Bihar Election Results Are Out?

If you have bought my course:

If you do not want to trade the directional strategy then take the non-directional trade on 5th or 6th when VIX will be the highest. The profits will come in few days. You should be able to make good profits within a few days because next week VIX should keep dropping. And I really do not think very huge movements will come. Even if it comes dropping volatility will help us.

Rest you know when to take profits out.

If you have not bought my course:

Of course these are the best time to sell options, but the unlimited loss risk is always there. So trade with caution.

You can take my course and learn the best methods of hedging and trading virtually stress-free. Not only will you trade worry-free but you will start making profits.

Click here to learn more about my course.

Note: Update to Bihar elections results and profit booking is here:

http://www.theoptioncourse.com/india-vix-dropped-book-profits/

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