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Last Updated : Apr 29, 2019 10:58 AM IST | Source: Moneycontrol.com

'Traders must design an ‘options strategy’ one day prior to election results'

Only one day prior to the outcome of the event of election results, we must design an options-based strategy to take a directional call on the market on either side.

Shrikant Chouhan

Over the weekend, Brent Crude fell below the level of USD 72/bbl, which is extremely positive for emerging markets (EMs) and for Indian markets.

It is another example of news follows price because in spite of several weak days since the beginning of the week, Nifty has rejected to fall below the level of 11,550.

It shows that market discounts a lot of things well in advance, which we failed to digest in the light of current news flow and that is the reason we should always convince ourselves into believing that market is always right.

Close

Coming to the quarterly results, except Yes Bank and giant automaker Maruti Suzuki India, most of the companies have delivered a decent set of quarterly results.

Volatility was high and is going to remain high as elections are going to keep the level of anxiety high amongst market players.

As the election result date i.e. May 23 approaches, volatility would increase, and our strategy should be to trade in one direction till the results are out.

Here we need to decide, whether it would end positive or negative on our own gut feel. If we are positive, then the strategy should be to trade long in quality companies at each of the major support levels with specific stop loss.

On the other side, if someone’s view is negative then trade short at each major hurdles. Both strategies would make money, as markets are going to remain volatile in a bigger trading range.

Technically, our stance is positive on the market and recommendations are in the same direction.

Only one day prior to the outcome of the event of election results, we must design an options-based strategy to take a directional call on the market on either side.

For the week, based on fundamental developments and closing above 11,752 (highest weekly close), Nifty should revisit 11,860 (which is more likely) and above that, it would even climb to 12,000 levels.

Failure to cross 11,860 would keep the sentiment rangebound. The strategy should be to trade long with a final stop loss at 11,700.

Sector-specific: we need to focus on banks, commodities and pharmaceutical stocks.

(The author is Senior Vice-President (Equity Technical Research) at Kotak Securities)

Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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First Published on Apr 29, 2019 10:58 am
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