India’s benchmark Bank Nifty fell 470 points from yesterday’s close of 50,803 after a gap down opening in the morning. The important question is, why was today’s selling not aggressive despite the presence of institutional sellers in the market?
Why Was Today’s Selling Not Aggressive?
The answer to this unique phenomenon lies in the gamma imbalance in the Put options caused by the surprise 150 points fall. Today, the 3D Delta System captured the institutional seller entering the market in the morning after the gap down opening. It also indicated that the downside target for the institutional seller was around 50,152. So why did the market bounce back ahead of the downside target?
Why Nifty Bounced Back Ahead Of The Target?
Although institutional traders always set a time and target before entering the market, they manage their positions intelligently to negotiate the threat of theta decay as time passes by on expiry day. We all know the adverse correlation between the price of an option and its theta decay. Today, the 3D Delta system indicated that the institutions waited till 1 pm today keeping in mind the existing gamma imbalance in put options and the implied volatility of the designated option strike. Thus positions were squared off at 2:48 pm.
Today’s Trade Execution
At Amplify we never predict the market; we trade if institutional traders enter the market. It gives us the edge over the rest and provides extreme levels of accuracy. To test the accuracy of the 3D Delta System along with contra view by premiums, we bought the 50,400 CE at INR 125 and sold 50,700 CE at average of INR 72. The spread was done in the ratio of 1:2 that means, 1 lot of 50,400 CE was bought and 2 lots of 50,700 CE were sold. This spread was initiated at -10 credit (which means, we get credit in our account to put this spread). This spread was covered at the debit of INR 121. So collectively, we got 121+10 =131 points from this spread. This spread closed at INR 285, as 50,700 CE expired worthless. Coincidence that we sold 50,700 CE two times? How did that happen?
Option Trading doesn’t have to be difficult. Trust me. You just need the right approach and hardcore discipline.
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