Options Strategies for a Volatile Market

Code : FAC0062

Year :

Industry : Financial Services

Region : Asia

Teaching Note:Available

Structured Assignment : Not Available

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Abstract: Meghna, a trader at Wellvet Partners, a financial services provider, needed to plan and implement option strategies for volatile markets. In consultation with Aruna, Senior Options Strategist, she planned to use Nifty March 2020 options to trade option strategies for volatile markets. India VIX (Volatility Index), a proxy of stocks return volatility traded on NSE, rose by 70% during the fourth week of February. This added to her confidence that the market was going to be volatile and Nifty would move by at least 10% in either direction in March 2020. However, Aruna warned her that the market could turn out to be stable instead and she should, hence, assign equal probabilities to volatile and stable markets while choosing an option strategy.

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Pedagogical Objectives:

  • Understand the difference between speculation using options and option strategies.

  • Understand various option strategies that can be implemented in volatile market conditions.

  • Learn how to select the best option strategy in the given market conditions.

    Keywords : Option Strategies; Long Straddle; Long Strangle; Short Call Butterfly; Short Put Butterfly; Short Call Condor; Short Put Condor; Volatile Market; Indian Stock Market; High Volatility; India VIX, Volatility Index, Robustness of the Strategies; Nifty, Derivatives, Trading

    Contents :
    » Introduction
    » A Note on Wellvet Partners
    » Meghna`s Analysis of The Stock Market
    » Option Strategy for March 2020
    » Exhibits

    Case Introduction >>

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