How to Trade Nifty Options in Bearish Markets

Trading Nifty options in bearish market, in bearish people traders say they lose money but fact is bearish markets offer best money making opportunity as panic is higher in these markets so markets react fast. In case of bearish market you always look for selling opportunities or selling signals in technical indicator. We are talking about nifty option so we will be buying out of money put options if time of expiry is greater than 15 days, or else we will go with at the money or in the money put option. After selecting the type of put option now we will completely focus on the price action of the underlying i.e. nifty future and wait for pullback to buy that nifty put option. Target will be 50% of the total premium paid while purchasing put option and stop loss will be 25% of the total premium. In trading nifty options always remember a golden rule that you will never risk more than 10% of your total trading capital at any point of time.
Also it’s very dangerous to trade Nifty Options without proper guidance & knowhow. So, why don’t you leave the dangers to us and take yourself the most lucrative profit margin in the stock market.

How to Trade Options in Bear Market

A bear market is defined as a drop of 20% or more in a market average over a one-year period, measured from the closing low to the closing high. Generally, these market types occur during economic recessions or depressions, when pessimism prevails .Bear markets reflect slowing economic growth and corporate financial problems. Fearful traders panic and dump their holdings at a loss, which pushes stock prices down further and ignites a fresh round of selling. Investors can use several bear-option strategies to profit from a market-wide selling frenzy

Step 1

Buying put options is a straightforward bear strategy with low risk/high reward potential. The goal is for the stock price to drop below the put option strike price so the option is in the money prior to expiration. The amount of risk is limited to the option price plus the commission.

Step 2

Reasons Why Sensex, Nifty are Sinking

1. Lower-than-expected GDP data
one of the main reasons behind today's sharp fall in Sensex was the lower-than-expected GDP growth figure.
Data released by the Central Statistics Office ( CSO) on Monday showed the Indian economy grew by 7% in the June quarter, slower than the previous quarter's 7.5% expansion. Growth in the June quarter of 2014-15 was 6.7%.
While the 7% growth rate matches the June quarter growth of China and still places India in the league of fastest growing economies in the world, economists said more measures are needed to step up the acceleration.
2. Foreign investors sell record amount of Indian shares in August
Foreign investors sold a record amount of Indian shares in August, offloading even more than in the midst of the global financial crisis, as turbulent markets in China led many funds to reduce their holdings in riskier emerging markets.
Foreign institutional investors sold a net 168.77 billion rupees ($2.55 billion) in Indian shares in August, more than the previous monthly record of 153.47 billion rupees in October 2008, according to data from National Securities Depository Limited.
The sales helped push the Nifty down 6.6 per cent in August, its worst monthly performance since November 2011.
Analysts said the sales were largely a result of the overweight positions in India by foreign investors, who have been heavy buyers since 2012.
Foreign investors had been net buyers as early as July when India was seen as benefiting from outflows from China. They remain net buyers of 275.2 billion rupees this year.
3. Rate cut by HDFC
Banking and financial stocks led the decline after reports of HDFC Bank's steep base rate cut on Monday sparked fears that other lenders will be able to match it only at the cost of margins.
HDFC Bank cut its base rate by 35 basis points to 9.35 per cent from September 1 in a move to capture wider market share, according to media reports on Monday.
The move stoked fears that pricing pressure would lead to other banks taking a hit on their net interest margins as most banks would have a base rate of 35-65 basis points higher than that of HDFC Bank.

HDIL OPTION STRATEGY

Buy HDIL 70 CALL @ 3

Buy HDIL 50 PUT @ 2.2

COST=5.2

TOTAL RISK  = 10400

RETURN = UNLIMITED

UPPER BREAK GIVEN POINT=75.2

LOWER BREAK GIVEN POINT=44.8

Pay off table: