Lots of option strategies are available with each option strategy having its own pros and cons. What kind of strategy is useful for something like Banknifty , which is an active index, which is a sectoral index and is a volatile index.
Any strategy which we want to apply, must ensure that we can travel with the market and it can take care of both the possibilities i.e. huge movements or no movements. In an unstable scenario when with a small news, markets / index start making wild moves, it is very important that we know advance skills of adjustments in our option strategies. All non-directional option strategies (where we are not predicting the direction of market ) require us to be very clear in our adjustment plans. When should the adjustment be made , at what point of Banknifty , what should be the action – all these points should be hundred percent clear, objectively, before entering the trade using non-directional strategy.
Since there are relatively huge premiums available in Banknifty options , if we are clear about our adjustment process in overall scheme of things, the daily decay in Banknifty options will surly result in very good results. Yes, this will happen even with volatile movements in the Banknifty index because higher implied volatility in option contracts of Banknifty, ensure very good theta i.e. time decay.
So most important part of Banknifty trading is the adjustment part. Once a good adjustment plan is in place, there is no looking back. And returns are fairly consistent also.
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