I have been receiving emails from my free as well as paid members on What To Trade In General Elections in India to be held in April-May 2019?
Before reading this article I suggest you also read impact on Nifty and Bank Nifty on India VIX due to General Elections 2019.
Since this two months are going to be very volatile – I would suggest going for the debit spread strategy.
A debit spread is a strategy where a trader buys an option near to the money and sell an option slightly Out of the Money (OTM).
For example at the time of writing this article NSE is at 11,621.95
Supposing a trader has a bullish view.
This is the debit spread he/she can initiate: He can always buy a Call Option at 11700 and sell one Call Option at 11800 or 11900 depending on his/her view.
This will keep the trader at peace since at least one of the option will surly make money. This is guaranteed.
Here is more on Debit Spread strategy:
The word starts with “Debit”. In economics debit is money taken out from an account. So it is evident a Debit Spread needs money to be taken out from your account. And spread signifies that the trade is spread up to a certain point – means profits are limited not unlimited as in naked option buy.
So depending on the premiums of the option you buy, you have to pay a premium and for selling one option you get back some premium paid.
Debit spreads are great during volatile times.
Since premium paid is more than premium received there will be a deduction in your trading account. Please note that whatever money is debited is the maximum loss for the trade debit spread option strategy.
You can read more about debit spreads here – Nifty Bull Call Debit Spread.
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Dilip Shaw, Founder
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