This post was written on 01-Feb-21 at 11.46 am.
Today, Monday, 01-Feb-21, is Union Budget 2021 day. Its live now in the Indian Parliament. Finance minister Nirmala Sitharaman is announcing the budget in the parliament now.
Whenever there is a major financial event, as a trader you should keep a track on India VIX:
As on 11.46 am it has already crashed more than 3.9% because the announced has started – the fall will be much swift from tomorrow. With time and very fast it will keep crashing irrespective of the movement of Nifty/stock markets.
What Will Happen?
Options buyers will suffer as the premiums will erode like ice melting, today and tomorrow especially.
If you have bought options and if in loss in such times, I suggest take a stop loss save as much as possible.
Option sellers have luck on their side on these melting India VIX days after the major event ends. Even if wrong up to some extent option sellers will benefit.
Update on 03-Feb-21 – see this graph of India VIX:
Note: India VIX was the highest one day before the budget 21 which was Friday, 29-Jan-21. It started to fall from the Budget day – 01-Feb-21. It will keep falling in future too.
Update on 04-Feb-2021 – India VIX dropped to 23.02 which is 3.07% less than previous closing:
For option traders India VIX is a very important factor to decide the future action. Its always good to buy options when India VIX is low and increasing. Which means you can buy options 3 to 4 days before a major financial event like union budget, RBI policy, state or general elections etc. And sell them just before the event day.
Once the event day is over you can start selling options.
Hope this article will help you to take a decision on when to buy and when to sell an option.
If you do my course you will be able to trade whenever you want and without too much risk as all trades are hedged. And most importantly you will not have to continuously watch the markets.
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