What Kinds of Strategies to Apply as Per India VIX

In this article, you will learn the strategies you can apply after looking at India VIX.

Today I got an interesting India VIX query via email from one of my clients. So I thought let me post it in the blog to help people.

The question is here:

Dear Dilip,

Good morning.

Just trying to know a concept for Option Selling or Hedging strategy.

Here are some range bands of India VIX:

10-15
15-20
20-25

Generally, for the above figure which range-band is best for options selling strategy like straddle, strangle, covered put, covered call, iron butterfly and iron condor?

Which India VIX range is generally considered for buying or selling Nifty Futures and BankNifty Futures.

Can you give some ideas or write an article.

Thanks for your cooperation.

Regards,
Rabindra

My reply:

First, you can see live India VIX here:

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

India VIX can only indicate future volatility – and this is just an indication, not a guarantee. But yes it does help to decide what kind of strategy to deploy on a particular day.

So if you see India VIX at the 10-15 range, it is advisable to trade conservative strategies as they are unlikely to hit the stop loss. Though the profit may be small, you will end up making some money which is better than losing money. It is better to make a small profit than to make a small loss.

In this range, it’s better to trade option selling strategies like straddles, strangles, covered put, covered call, iron butterfly, iron condor etc.

If you see India VIX in the 15-20 range, you can do a combination of trades. This means trading with some money the conservative strategies like the iron condor or ratio spreads (as described in my paid course) and trading some aggressive strategies like future hedged with options which are also there in my paid course.

If you see India VIX in the 20-25 range, it is advisable to try debit spreads or aggressive strategies like future hedged with options aggressively. India’s VIX in the 20-25 range is very dangerous for the markets. Here the intraday swing can be up to 3% up or down, and the gap up or down openings will also be very wide.

In this range, you can also do long calls or put straddles or strangles. However, do not go overboard and trade with multiple lots. Even if you are HNI you have to trade with max 5 lots.

I hope this helps.

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