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Union Budget 2020 Is Coming What to Trade


Union Budget 2020 will be presented in the Parliament on February 1, 2020, at 11 am. Till then there will be huge volatility in India markets.

Here are some pointers that can help you make a decision to trade:

1. INDIA VIX will keep increasing

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

Currently, INDIA VIX on Jan 17, 2020, is at 11:14 am is at 14.28, up by 0.10 points or 0.71% from the previous close.

It will keep increasing until February 1, 2020. After that it will start to drop. It will take about 10 days for India VIX to be back to normal. Which means by 10-Feb-20 it will be back to normal.

India VIX as on 31-Jan-20, 10.54 am is 17.26:

India VIX on 31-Jan-2020

So what you can do? Here are some helpful pointers:

  • Option selling can be dangerous if not hedged.
  • Even if you do please do it intraday only with strict stop loss.
  • Same with option buy as options premium will reduce/increase drastically with time as India VIX will keep decreasing/increasing as per the speech and the expectation of the markets.
  • No Futures trading, please.
  • 4-5% up/down within 10 days of Nifty depending on the outcome and expectation of the budget. So it’s better to take a call on Nifty, not on Bank Nifty or any stock.
  • Please do not be rigid and trade only Bank Nifty – one-point gain in Nifty is 75 whereas, for more risk one-point gain in Bank Nifty is just 20.

    Note: If you are a beginner options trader I would suggest starting with my Nifty course. It’s very easy to learn and implement the strategies. Bank nifty is volatile – and that is the problem. It’s good for experienced traders, not beginners.

    2. When INDIA VIX increases option premium will also increase, so if you buy options they will be costly compared to other days on the same day.

    3. What is good for option buyers?

    Option buyers need a volatile market to make a profit. If markets are too volatile it’s good to go for long straddle and make money, but with a strict stop loss.

    Since volatile markets favour option buyers, to make it justified for option sellers – India VIX does the job – it increases the option premiums to attract the option sellers. Otherwise in a volatile market option sellers will stop trading out of fear.

    Since theta (time) decay is enemy of option buyer it’s advisable to go for monthly options to buy options – weekly options can be a killer for the option buyer.

    4. What is good for option sellers?

    Option premiums will be attractive to sell but then volatility will be an issue. If you do not take a stop loss you may suffer huge loss – so its recommended for both option buyer and sellers that if you are trading during volatile times you must trade with strict stopples.

    Option sellers can trade short straddle with strict stop loss.

    Your stop loss must be HALF of your profit target. Unfortunately, if you keep it close you may see the stops being hit very often. So to be safe, trade positional not intraday and keep your profits to at least 100 points and stop-loss at 50.

    That way if you are successful even 50% of the times you will trade profitably.

    Update: Text of email sent to my subscribers on Feb 1, 2020, 11:47 AM (The Budget Day):

    Just wanted to send you a reminder that today due to volatility please be careful with your trading.

    Just trade options buy only for today intraday only.

    Please do not trade futures.

    Close your trade today itself.

    Note that I do not get anything by sending you such emails but it’s for your benefit only. It will be good if you listen to me.

    If you want to trade safely without bothering much too much about direction then do my course. Let people who want to make too much money from stock markets care about direction and lose – while you trade with hedge and never care about the direction yet make monthly income.

    If you have lost a lot in markets – its time you get back your money from markets only. It will be small and slow, but consistent monthly income will come to your house every month. You can use that money to enjoy the small joys of life.

    Update on 03-Feb-2020:

    Please read above that I warned you you not to trade heavily on the budget day due to volatility. See what happened on that day – budget day 01-Feb-2020 (Saturday) to BSE and NSE:

    NSE Fall on Budget Day – 1-Feb-2020

    And see what happened to Bank Nifty:

    Bank Nifty 01-Feb-20 Close

    And see how India VIX rose till budget then started falling:

    India VIX on 31-Jan-20:

    India VIX on 31-Jan-2020

    India VIX on 01-Feb-20 at 10.37 am – THE BUDGET DAY – Budget was being read by Finance Minister Nirmala Sitharaman at this time in the parliament:

    India VIX on Budget Day 01-Feb-20 at 10.37am

    India VIX on 01-Feb-20 after market closing:

    India VIX 01-Feb-20 after market close

    India VIX on 03-Feb-20 – first (next) day of trading after the union budget day 2020:

    India VIX on 03-Feb-20

    India VIX on 04-Feb-20 – just second (next to next) day of trading after the union budget day 2020:

    India VIX 04-Feb-20

    As you can see India VIX Dropped from 17.93 to 14.58 – a HUGE drop in just 3 days of trading.

    What did you learn?

    Next time when a big event comes keep this in mind that India VIX will increase till the time of the event, creating volatility in the markets, and then will drop after the event is over.

    If you want to trade like a professional you can do my Nifty & Bank Nifty courses.

    You will learn when to buy and when to sell or when to combine both buy and sell to be successful most of the times. You will also learn strike selection which is a vital part of trading.

    Of course, if you do not understand something you can ask me.

    It’s easy to understand the strategies.

    Courses:

    Nifty Conservative Course – 3-5% average return per month – Minimum 1.1 Lakh required (may change in future)

    Bank Nifty Weekly Options Course – 5% average return per month – Minimum 40k required – (may change in future)

    Please click here to know the course fees.

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  • About the author: I started trading stock markets since 2007. However my first 3 years were losses. Then I dedicated almost 1 year on studying, researching, paper trading options and learned a lot in that time. Since 2011 I am trading Nifty options profitably. Call me if you need any help trading options on 9051143004.

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