Bank Nifty was very closely associated to our prop desk. Our almost 50% trading volume was with Bank Nifty weekly options. And we did Good… I’ll leave that to our students and our prop brokers... 😎 😃
So, it’s an emotional moment when it was announced that Bank Nifty weekly shall become extinct. For amplify to transition to Nifty and more of Bank Nifty monthly was a piece of cake. Infact, we are ready with few new calculations and already on it. Flexibility as always allowed us to evolve and create a decent edge in the market. We have hired few new people in our team to assist us in our new calculations and the results are earth shattering. What does it say? YES, we will do a batch in December 2024. READY?
As a small tribute to Bank Nifty weekly options, we did few trades, but in monthly. In the end, we are alpha makers.
Simplifying the Process
The most important part about hedge funds is that they consider volatility as a non-linear variable. Therefore they avoid the trap of historical figures. Rather, they work on plotting the covariance factors between the Option Theta and Vega. This process is simple. Imagine you have an ice cube and you are observing how much time it takes for the ice to turn into water as the temperature shifts above or below the point of inception. Similarly, you capture the important data points of an option strike to capture the mispricing zones based on the covariance factors. Rest assured that even though you are not the market maker, you will have a formidable edge. If you are wondering why? It is because; institutions rarely sell undervalued option premiums or buy overvalued ones.
Execution Based On Mispricing
Take for example this week; the 51,000 monthly call option was trading @600 on 13th Nov 2024 at around 11:30 PM, which was way above its fair value around in the afternoon. In such circumstances, all you need to do is confidently sell the 51,000 CE and wait for the value to neutralize. So the CE was sold @ INR 570. We also, bought 50,000 Put at INR 299.Trades were appropriately hedged. Both trades were done on 13th November. The sold call was squared off same day after 2 hours when its fair value arrived and we bought back at INR 345. The Put climbed to INR 420 and we sold at INR 418 today (14th Nov 2024). The biggest advantage of trading options, based on valuation is that it incorporates news and events during live market hours as well.
A very different side of markets and how it works, we are writing a small article on that. We still emphasize on traders and especially Investors learning how to trade options. Remember , THERE IS NO BEAR MARKET IN OPTIONS! We will end this article by saying a final BYE to BANK NIFTY WEEKLY CONTRACTS (Altough I have a gut feeling, you’ll resurrect soon) and…
PREMIUMSNEVERLIE
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