Tuesday, August 9, 2011

A Relief really - probably

There is some sense that today's low at 4950 may have been at least a short term low. The Nifty bouned from these lows to close significanlty higher. While intraday volatility remained high, the close did suggest that 4950 should hold for now. Ideally, prices should come down to test the 4950 level, and the test should be successful. But, in the absence of this test, we should assume today's low to hold in the short term, given the intra day price action.

What should traders do now?

Buying options is not a good idea given large implied volatility increases. With 4950 as a stop, it is possible to sell put options. This gives a bullish bias. You must then have a profit target which could be abut 50% of the selling price of the put. A second method is to buy futures. Your stops should be closer than 4950, maybe the inraday low.

This is written at 7.47 PM. It is possible that the scenario may change overnight, depending on the U.S. markets.

2 comments:

gourv said...

Hello Sir,
@Present time with so many news channel and Experts there are trading ideas available all ways.But No Expert never says "I have no idea".
Today I watched you on ET Now advising viewers not to trade in such volatile market.Its really takes a lot of braveness to appear in a news channel and suggesting viewers not do anything.Thanks for speaking to your mind in the show.

Regards
Gourav(TCS guy meet you in investor camp)

Anshul The Maniac Finance Kid said...

sudarshan bhaiyya i feel a trader'sbest bet is to ignore things one has no clue oflike dow,just see sgx opening dont question y and buy out of money options to hedge. what say?