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What To Trade After FED Meeting

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FED meeting has began and results will be announced Thursday at 2 p.m. (1800 GMT). So in India it will be around 12 tonight.

One thing will SURLY happen tomorrow. VIX will fall. It is currently at 22.00.

Why? Because all the speculations on what the FED will do will come to an end.

Fear factor will go out. So VIX must decrease. So will the option prices.

What else will happen?

One out of the following 3 things will happen, but mostly a copy of how US markets behave:

1. Nifty may move up taking the result as a good move.
2. Nifty may move in a 30-50 point range, ignoring the results.
3. Nifty may move down, taking is at a negative sign.

Depending on how it moves one trade can be done tomorrow.

If moving up: Sell ATM Put and buy 100 points below put.
If moving down: Buy ATM Put and sell 100 points below put.

You may close it tomorrow itself if making more that 10 points profit that is 1% return or close it if you lose 10 points. That is it. Calculated risks often work. Intraday 1% return is excellent.

Because VIX will fall continuously, taking just the buy call option will get very difficult. Options premium will depreciate fast. Even with the move in Nifty upwards, they will not move much and you will get disappointed. So the trade is Sell ATM Put and buy 100 points below put.

However when Nifty falls, VIX will NOT fall as steep as when Nifty will move up – so the trade – buy ATM Put and sell 100 point below put.

No naked trades please do hedge. Save your money.

People who know me know that I always look far at least 15-20 days, not what may happen tomorrow. Looking at Nifty move I will do strategy 2 of my course directly. And will wait for 15-20 days for my profits.

However tomorrow is also a great day to trade strategy 1 if Nifty fails to move or is moving range bound. If is takes direction – trade strategy 2 directly.

Aggressive directional trade can also be taken, but reduce lot size as losses are small but profits huge. 🙂

Trade Well – Trade with your Brian Not Heart. And be patient.

Keep Learning.

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About the author: Dilip Shaw 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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