The Union Budget of India 1 Feb 2022, also referred to as the Annual
Financial Statement in Article 112 of the Constitution of India, is the annual
budget of the Republic of India. The Government presents it on the first day of
February so that it could be materialized before the beginning of new financial
year in April.
Indian Stock markets have witnessed high volatility
during most Union Budget announcements in the last 10 years.
With High volatility, comes risks and opportunities. In
this article we will discuss popular F&O Strategies traders adopt
and how can one manage risks better while maximizing returns.
Let’s start with History
The average Intra-day movements in the last 10 budgets
have been around 2.9% in Nifty and around 4.3% points in Bank Nifty. In
the last Budget, market rallied more than 4% in a single day for Nifty while
Bank Nifty rallied over 7%. Below graph shows the year wise movements in points
for both Nifty and Bank Nifty for last 10 years.
How have Option Prices
moved over the last few budgets?
The table below shows the
Option Prices in the last 3 budgets considering the budget day as the “At the
Money’ strikes. Pre-Budget IVs gain due to uncertainty of the event and as soon
as the budget is over the IVs shrinks specially on the side against which
market is moving.