Friday, July 3, 2009

Pre Budget Moves

Disclaimer: Only the Finance Minister knows what he is putting in the budget. As traders, we should try to manage expectations from big news events.
The ideal way to trade a news event is not to do anything. Sometimes (as in the election results) there is early warning of what the news might be.
In case of this budget (or any budget) that sense is not going to be available.
So we should try to set up a trade based on our own understanding of trading news events. It is all about trader perception. Will STT be abolished or 'tweaked' as some people are demanding on the TV? And, if it is 'tweaked' will it bring long term peace and prosperity to the country? I can answer this: STT is irrelevant to all but a few large local brokers (who should not be doing proprietory trading anyway).
My sense is: the budget may prove to be a non-event, as previous budgets are doing. Then, we are left to follow our charts. The reason why big news trading is difficult is due to volatility which occurs during announcements. The charts are telling us: the Nifty is poised for a big move, direction unknown. Why? The Index is in a narrow trading range between 4250 and 4400, for 12 trading days. An explosion is imminent.
A simple way to trade this is to buy 4300 calls and puts. Then, exit the losing leg next week. Or, buy 4400 calls and 4200 puts. But options should be preferred due to the increase intra day volatility.
I also regret that I could not give you a more tangible strategy for the budget: like saying buy xyz because the budget will give big concessions to the company. Perhaps other better informed people on Tv will tell us what exactly to do.

Have Fun!

6 comments:

Vishal said...

Hello Sir,

I have bought 4200 put and 4440 call.. if the market doesn't move out of this range immediately post budget how long shud i wait before a exit.. because the time value will reduce the premium with each passing day.. how can i keep a stoploss for the total portfolio of two options? one way i was thinking is to get out of the position once the total premium falls by 40 Rs. from my buying price. Is this way correct?

Thanks

Anupam said...

Mr Sukhani,

well said specially the last point.
Once this event pass through people will look back to global issues like the massive unemployment number in US (and in India? Who counts and how?). Will see how market reacts when everyone is in hard reality.

regards
Anupam Majumdar

roger said...

Today as someone on TV said we saw intelligent buying in the last hours of trade.Nifty did manage to close above a trading range and monday promises to be a great day for bulls. Tata steel has broken out of a month long consolidation and will lead the rally now.

What are your thoughts on that sir? Last time when Nasdaq was down 61 we pulled out from 4149. Today we didnt even break 4300. That is a damn strong market. Every analyst thinks markets will fall or move sideways, but I think it will go straight to 4700, consolidate for a day or two and move to 5250. Chinese and Taiwanese markets are already out of their consolidation and and are at 52 week highs waiting to rally more.

what are your thoughts sir.

gurvi said...

Hello Sudarshan ji,

Now since Nifty crossed 4400 mark :)
What is your next target. 5100?

Cheers;
Gurvinder

rohit said...

sir many times even if news is positive from a event like iip numbers even then market react negatively or vice-versa and volatility at the moment news announced is very high, its difficult to trade,so same may happen on monday , so please tell us will it be wise to let the event passed and then enter after impact of news is over or just to enter on the basis of news although its likely some of them may not be able to understand the impact of new but are trading on the basis of interpretaion of news made by so called tv channels anchors ?

Vinod Dhandapani said...

Mr. Sukhani what is your take on the following post from afraidtotrade. http://blog.afraidtotrade.com/monthly-elliott-and-fibonacci-analysis-of-indias-nifty-july-4/

Thanks
Vinod D