NIFTY 50 Shorting strikes based on Vix

2021年10月12日

Shorting strikes purely based on india vix volatility index

- we can short one side either CALL or PUT side / if we do both then we can conclude that it is short strangle
- Short 18150 CE and Short 17850 PE

🛑 India Vix helps to calculate the expected volatility for shorter time period
- currently india vixis at 15.85 down by -1.49% which means premium is declined in both CE as well as PE
- drop in premium bcz declined in volatility
- what is 15.85 ?
- well, it is expected volatility for next one from today it means nifty can go up by +15.85 % or it may can go down by - 15.85% (for next one year)
- it doesn't include any global sentiment or news
-now we can calculate expected volatility for next one month and even we can calculate for next day also
- Question is what is the use from it ?
- well, it tells us that it may can stays in between mine range when market is choppy / range bound
- we get that one point it is so much help full in side ways market , right ?
yeah
- if you needed range for next one month then , use this formula
Vix/sqrt (12) = x%
where - 12 is number of month ( standard vix is calculated for one year )

for ex, vix = 15.85 , sqrt(12) = 3.46
15.85/3.46 = 4.5 %
means from today's market close to next one month nifty can go up by +4.5% or it may can go down by -4.5% .
using this we can do short strangle for one month as we know as expiry appears premium will fall , or bcz of time decay / theta
caution it doesn't include any global , investors sentiment

- calculation for next day

if needed short strangle strikes for next day use this formula
- Vix/sqrt(365) =Y%
where 365 is number of days in one year

now for example (which is exactly given below)
Vix= 15.85 , sqrt (365) = 19.1

15.85/19.1 = 0.829% (149 points)
it means nifty can go up by +0.82% or it may can go down by -82%
- in other words nifty can go up by +149 points or it may can go up to max ie. 18150 (17991(previous close)+ 149 (expected points))
- and it may can down by -149 points or it may can go up to max ie. 17850 (17991-149)


now,

🛑 we can observe that market may be stays in between with the range of 18150 - 17850

- so , i will exit from one side position if any breakout/ breakdown happens (just to reduce the risk in one side )
i will exit only when support/resistance breakout (if you need resistance / support scroll down mine profile)

- if short both side / if we did short strangle
if breakout at 18050 happens then we can exit from short CE position and hold short PE until achieve the target of 18100 - 18150
if breakdown at 17850 happens then we can exit from short PE position and hold the short CE until achieve the target of 17750


i hope that it will help a lot ,
if you like it do follow for more,
have nice day