Trading strategy in Volatile Market

Market shown that it is 'Supreme ' and made mockery of most of the analysts . Globalization took toll on Indian markets. Most of the analysts including me, were not comfortable with the way market was trading above 4200-4300 and were of a view that market will go down and try to test 3800-3850.

Market did the same but not in the way everybody thought. It was going down like falling the house of cards. IF that was not enoguh, the V shaped recovery after making bottom near 3800 made most of the players on wrong foot.
The non-stop news coming from US ,making players unable to take any sort of positions be it long or shorts. Daily Gap up & down in Indian market ( curtesy Dow Jones) made all investors, traders & Players like HNIs, Large traders or small Fund managers very uncomfortable.

Market shown its Suprimacy , So players has to go to basics. The first rule 'Bull Market has no Resistances and Bear market has no Supports'. The supports were breaking so fast in 6-7 days of downfall from 4500 to 3800 that the levels were just numbers and no supports.

Second Rule - In bear market relief rallies are too fast and vicious. The same things we are observing now, we are about open a good gap up on Monday . So we are retracing fast in 3 days to the fall. To add to the 'Firangi induced' volatility, is our last week of expiry. So every player will be ready with his position to cover on or before expiry as future look very uncertain.

FIIs are Major sellers in Market causing Rupee to depreciate as much as 15% in last few days. However IT stocks are not able to gain much because sentiment is much hampered for these stocks as much of business for them is from US ,and everybody is suspicious about the health of US companies to spend much on IT development . This would have been a boon for IT companies as they were to have Super profits of 15 % due to depreciation of Rupee.

Trading strategy : Last few months It was looking like market moving in a range with small volatility. So major HNI and Small Fund Managers were happy in selling Options ie calls and puts to get 'COOL' 3-4 % of profits in a expiry. This time many of them had burnt fingures because of two way movement. They had to go for hedging/ counter hedging and made things more complex.
While doing this one tends to forget simple rule that 'OPTIONS WRITING PAYS ONLY IN NON TRENDING MARKETS'. One can not be stuborn with markets and make a single strategy (like Options writing) to earn in every type of market.

It is better opportunity ( & simple too) to play with plain Options ie calls and puts strategy like Strangles, Straddles etc. Plain calls and puts are paying much more with limited risk .

Now we are moving in last week of expiry and are about to open with a gap up on Monday. Technically there are series of resitances starting from 4330 to 4550. It is advisible not to Fight with market and Play with simpler tools like Options, when we move 100 - 200 points in nifty in a day. (Those watching charts can watch Candles & gaps in daily charts)

Hoping this write up will be eye opener and Wishing all Happy and Safe trading.