5 F&O STRATEGIES THAT CAN HELP TRADERS MAKE MOST OF VOLATILITY

GET THE BEST TRADING TIPS ON YOUR WHATSAPP !!!! FOR THE DETAILS WHATSAPP  YOUR NAME & SEGMENT ON 9039542248

Rises and falls are an inherent part of investing in the stock market. Each phase of the market has its unique characteristics, and it takes an appropriate approach with the right mindset to limit losses or maximize profits, as the case may be.More often, investors fall into illusions and try a long period of correction and stagnation, which leads to negative portfolio values. Contrary to what investors might expect, gains are never linear and are mostly lumpy.
Most stock investors are only buy-side and have no plan to protect the portfolio against potential fluctuations in the market, resulting in underperformance Stock price movements occur in only a few trading sessions. The solution to this is to be a patient investor, as stocks always go up over the long term provided funds are placed in quality stocks with strong fundamentals. Here are some useful techniques that would help you through the volatile phases of the market.

1. Protecting the portfolio
Hedging is an important part of any bumpy ride in the market. One can hedge a portfolio by buying nifty put or bear put spread i.e. H. with monthly contracts or long-term options after understanding the composition of the portfolio. The hedging would depend on the type of stocks in the portfolio and their beta. For example, in a portfolio with a large-cap name like Nifty, it's easy to get into beta and plan a hedging strategy versus mid- and small-cap names. A portfolio with mid-cap names involves choosing the right hedging instrument (Nifty or stocks), the right strike price and amount for the spread, and finally monitoring the position and exit.

2. Create short positions in stock futures
In a bear market, selling futures offers an opportunity as many weak stocks fall sharply. It's always wise to go with the trend until it won't bend anymore. In a weak market trend, the trading short position should be more than taking a long position.a. Based on a top down approach, one can pinpoint the weak sectors and stocks to initiate short ideas to generate alpha in the market. Stock specific put purchases and bear put spreads can also help seize the opportunity during a market correction phase.

b. To pick stocks, T is ideal for picking a stock that has a weak structure. A moving average with crossover and trendline breakdown are some of the technical indicators to identify undershort stocks. Another derivative indicator to identify short stocks can be based on the addition of Open Interest (OI) (short building and long unwinding), higher writing calls and stocks with lower put-call ratios.

3. Generating returns through call writing
Writing calls is the best and most popular way to reduce the cost of holding positions and get additional returns on an existing position.a. To do this, investors must opt ​​for stocks to write options/puts based on stock-specific liquidity and maintain a safety margin when writing strikes. The strike price may be based on the buffer and a sufficient premium yield. Traders need to monitor the position by inserting certain alerts into the system that will help in deciding on an exit or trailing mechanism.b. Writing calls only brings some inflow as a premium, but a larger rise in stocks beyond writing strikes may not help produce a desirable actual return. It is more suitable for participants who are looking for a consistent cost reduction and a specific percentage win scenario.

4. Long & short trades
Pair trading provides an added benefit in such market scenarios as many pairs such as HDFC Bank and HDFC are highly correlated and offer opportunities when they deviate from their mean. The risk is comparatively low when trading pairs as both stocks have long and short positions in the market.

5. Trading in option strategy and option spreads
When market sentiment is bearish, volatility usually remains high, as does the option premium along with higher market risk. Option writing is not recommended in higher implied volatility (IV) scenarios, even if the option premium is high. It is better to opt for Butterfly and Iron Condor strategies than just selling out of the money (OTM) calls and puts. Selling or buying a futures contract must also be hedged with protective puts and calls to mitigate risk. This exercise will help avoid any panic when making margin calls.

Traders are advised to liquidate most naked positions intraday and avoid carrying too much leverage until the India VIX (volatility) drops to the comfort zone. Fundamental analysis is the guide to long-term investing. Similarly, technical analysis is the best tool for traders to make profits in this ever-evolving market.