Options Strategies for a Volatile Market
Code : FAC0062 |
Region : Asia |
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Introduction: It was the last week of February 2020 and the Indian stock market was plummeting like other stock markets around the world. Aruna Golwalkar (Aruna) – senior strategist at Wellvet Partners (Wellvet), a financial service provider, called up her team member, Meghna Kansal, (Meghna) – a trader who had joined the risk management and derivative strategy department of Wellvet in January 2015. They discussed the Indian as well as global stock markets, as markets around the world had dropped sharply in the last week of February after the outbreak of the novel coronavirus (COVID-19).. A Note on Wellvet Partners: Wellvet was started by Vipul Rana, a serial entrepreneur, and Narayan Maheshwari, a trader and stock market influencer, in 2011. The firm was based in Mumbai, Maharashtra, a state in western India. Over a period of time, Wellvet grew into one of the leading financial consultancy firms in India.. Meghna`s Analysis of The Stock Market : Meghna found that in January 2020, Nifty had traded in the range of 11,962 to 12,362 points. However, in the first week of February 2020, the market (Nifty) traded mostly on a positive note. Although there was some selling pressure at the end of the week–Friday, February 7, 2020 –Nifty closed at 12,098, which was 390 points above the Monday, February 3, 2020, close level of 11,708 points... Option Strategy for March 2020: After a prolonged discussion with Aruna and based on the analysis she herself had done, Meghna planned to use Nifty March 2020 options which had a lot size of 75 (Refer to Exhibit I for end of the day values for Nifty from July 1, 2019, to February 28, 2020). India VIX (Volatility Index), a volatility index based on the index option prices of NIFTY, rose to nearly 70% during the fourth week of February.. Exhibits: |
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