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Home/ Questions/Q 570
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Abhishek
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AbhishekProfessional
Asked: October 19, 20212021-10-19T10:04:34+05:30 2021-10-19T10:04:34+05:30In: Derivatives

What is the Best Options Strategy for Volatile Market?

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Which is the best options strategy to implement when there is a heavy volatility in index?

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    1. Nilesh Jaiswal Contributor
      2023-09-14T00:00:00+05:30Added an answer on September 14, 2023 at 12:00 am

      Which strategy is best for high VIX?

      Yes, It is very difficult to take move during volatile markets. I would add a few tips for you that can create a certain clarity as to how to progress when the market experiences high volatility.

      Volatility in general is the price fluctuation of a stock in stock exchanges.

      Stock markets undergo volatility quite frequently and under such conditions you need not panic.

      When the volatility is typically high you must follow certain trading patterns that involve the implementation of strategies for good returns on investments.

      Option Trading Strategies in High Volatility:

      Depending on the market’s price fluctuations and the degree of risk you can bear, experts have defined strategies to win over the trading platform, NSE/BSE. You can try these trading option strategies such as long puts, short calls, straddles, Hedging and benefit

      1. Long Puts: You can take the advantage of the downward movement of your chosen asset and make moves to buy put options.
      2. Short Calls: You can sell call options and collect premiums from the buyer and also benefit from the time decay.
      3. Straddles: In trading cycles, the volatility may cause larger moves in either direction ( one direction that favors your stocks and the other opposite to it). In such a situation, you can make profits when you buy calls and put options that complement each other in strike price and expiration date.
      4. Hedging: It is a common procedure that is implemented in options, futures, or other relevant derivatives to cushion the market fluctuations.

      Strategies in Option Trading on Low Volatility:

      You can also execute trades in low volatility conditions that encounter lower price fluctuations and cause less risk on your underlying assets in the stock markets. You can try on debit spreads & ratio spreads to make good returns on low volatility conditions.

      Debit Spreads: You can reduce the cost of the trading, limit the risk and gain rewards by employing the debit spreads. You must buy and sell options of underlying assets on selecting a different strike price with the same expiration date.

      Ratio Spreads:  In this kind of strategy, the directional bias, and an increase in volatility does benefit the trade. In it, you must buy and sell options of the identical underlying assets, same expiration date. However, you will have to select a different strike price and lot size of the underlying asset.

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    2. Best Answer
      Vishal Jain
      2021-10-20T10:26:25+05:30Added an answer on October 20, 2021 at 10:26 am

      First of all we cannot predict the market movement. If you can predict the volatile market, you have many ways to earn money.

      Here are few general ways to predict the volatile market.

      1. Mostly volatile markets are expected after a trending day (up trend or down trend)
      2. If it forms high and low before 10:30 am

      The above indications are not holy grail, anything can happen in the market.

      Best Strategy to execute in Volatile Market:

      1. You can sell or buy options at day’s low or high
      2. Sell out of the money call and put options (Short Strangle)
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