Nifty was higher on 8 out of 15 budgets. Learn option trader strategy here

Of the budget days in the last 15 years, smelly Closed in the green on 8 occasions with a highest change of 4.74% at 14,281 on February 1, 2021. On February 26, 2010, the Nifty closed at 4,922, up 1.29%; On February 1, 2017, the Nifty was up 1.81% at 8,716. According to a report by Samco Securities, the Nifty closed at 17,577, up 1.37% on the last budget day, February 1, 2022.

On the other hand, 7 of the last 15 budget days were such when the Nifty closed at 11,662 on February 1, 2020 with a maximum loss of 2.51%.

Meanwhile, in the week preceding the budget, Nifty traded higher on 8 occasions in the last 15 years. The Nifty has rallied 9 times in the last 15 years in the post-Budget week. Samco’s analysis shows that the Nifty has given better average returns in the post-Budget week.

“We have seen 15 budgets (13 full and 2 interim) from 2010 to 2022. The average budget day return in Nifty is 0.26%. The average return of Nifty is -0.52% in the week before the budget and 1.36% in the week after the budget. The average trading range (difference from day’s high to low) on Budget day is 2.65% over the last 15 years,” said Apoorva Sheth, Head of Market Perspectives & Research at SAMCO Securities.

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for bank nifty Also, on an average, the post-Budget week saw better returns than the week preceding Budget Day or Budget Day.

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trading strategy for options traders

The data clearly shows that due to fear and uncertainty the market trades lower ahead of the budget and once the event is passed investors immediately discount it. If the budget is not favourable, investors take note of it immediately and the market is moderate on the day of the budget.

“Given the above insights we believe short term options traders should look for longer term opportunities post budget. If all their conditions are met then the chances of making money in the long run after the budget are high,” advises Sheth of SAMCO.

For Bank Nifty, the average gain is higher as compared to gain in Nifty and the number of positive closings is also higher.

“Given the above insight, volatility is much higher in Bank Nifty as compared to Nifty. If Bank Nifty goes up after the budget, option traders should look for hedged long strategies like bull call spread or call ratio backspread. Traders should also keep adequate stoploss in case the move is not favourable,” advises Sheth.

india vix trading

Data from the SAMCO report shows that the India VIX index, which measures volatility, is at a higher level before the event and falls down when the budget comes out.

Therefore, Apoorva Sheth advises options traders to adopt an intraday short straddle or short strangle strategy to take advantage of falling VIX. As volatility calms down, there could be a sharp drop in option prices.