Earlier Posted trade of Buy-nifty-5400 call as well as put has gone in the money in just 2 days. Today with Nifty going down to 5300 the combined option premium is now 184 (44+140), just few days back the same was trading at 150. With transaction charges of 4 rs. total profit comes to 30 per lot of 50! That too for a market neutral trade!
In last two months the implied as well as realised volatility of Nifty has fallen alot.
This leads to attractive long volatility strategies like straddle.
Trade idea: Buy 5400-Nifty April Call and Buy 5400-Nifty Put. The total option premium for the trade is arround Rs. 150 (Rs. 60 + Rs. 90)
The breakeven for the trade would be nifty ending lower than 5250 or higher than 5550.
The implied volatility for both trades is arround 14% p.a. and 13.6% p.a. These levels of implied volatility look very attractive since just few months back the levels were above 30%.
Techically nifty closed today at 5366 after remaining sticky at the resistance level of 5360. Month end view of Nifty would be atleast +-200 points, inline with the long volatility trade.
Target Achieved ! Once again !
Today Nifty was unpredictable but finally stayed below the resistance levels of 3100 after breaching the first resistance level of 2980.
Check out the old technical article on Nifty
Today I just unwound the stratgey mentioned earlier in my blog: Nifty Back in Action
The analysis was about resistance level of 2980 on the Nifty. The March 3000 calls were as cheap as Rs. 5 when the strategy was posted. I was holding March calls with strike 3000 and 3050.
Today after the market was looking like not holding up the 3000 level I liquidated my position. 3000 call at Rs. 45.9 and the 3050 call at Rs. 14.3. At the end of the trading session the 3000 call had gone down to 15 rs. and the 3050 call to 8 Rs. Luckily was able to sell the 3000 call at intraday high but missed out the 23 Rs. level on the 3050 call (I had placed the limit order at 25)
Nifty has gained back the early losses made earlier in the beginning of the month. Opening strongly today morning with close to 3% gain it is inching closer to the resistance levels seen earlier this year. 
The first resistance to be tested will be around 2980 and after breaking this level Nifty to pounce towards the next resistance level of 3100. With the global trend it seems that the Nifty will reach 3000 levels within the end of the week.
Something like the 3000 near month call (Mar) looks like an ideal trade with premiums around Rs. 4. Again expecting the market to move close to 200 pts more this week (4 days) seems too much to ask but it seems like a good bet to take given the risk is only 4 Rupees of premium.
Recently as the Federal reserve has cut the target rate to close to zero. The shot term treasury bond in US has jumped to record high levels. Govt. securities because of the backing of government assures investors that they will get their money back. Yields on these shot dated T-bill has gone very close to zero and there were cases where the value of these bonds had gone up over face value of 100. Meaning they were actually yielding negative returns.
Such surge in the govt. bond prices has created "bubble" in the government T-bill market. A security which was considered too boring compared to exotic real estate and credit linked bubbles we have had in past.
One thing is for sure that the previous bubbles were also caused due to ridiculously low interest rate targets set by Greenspan in early and mid part of this decade. What followed after the bubble was something that had impact over economies throughout the globe.
Are we going to face another bubble again stirred off by the Federal Reserve? and in which market is this new bubble going to burst? Treasury Bills? Maybe its too early to take a call, but never forget that the earlier bubbles were equally nascent and not spotted off early.
