Santosh Pasi suggests a short iron condor option strategy if BJP-NDA gets 360+ seats
With exit polls predicting a comfortable win for the BJP-led NDA coalition, markets are likely to see heavy activity on Monday. Still, the verdict is not a given, and traders will need to position themselves for any unexpected development.
Santosh Pasi, derivatives trader and Founder of Pasi Technologies shares his strategies on how to position trades on election result day, considering various scenarios: What if BJP-NDA fails to form government, wins 280-320 seats; wins 320-360 seats; If it wins more than 400 seats:
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SCENARIO 1: IF BJP LED NDA GETS MORE THAN 400 SEATS
Pasi’s view: Expect the market to shoot up and one can look at buying call options. But as the option premiums are already high (very expensive), we would rather prefer a credit strategy with higher gain on the upper side and lesser loss on the downside. Broken-wing Short Iron Condor is one such strategy:
Strategy: Broken-wing Short Iron Condor: (For 6th June Expiry)
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Short PUT 22200
Short CALL 23200
Long PUT 21700
Short CALL 23700
Total credit should be higher than 152.75 points (Rs 3,818 per lot)
Breakeven Points: 22,247 and 23,452.75
Maximum Profit: Rs 3,818 per lot.
SCENARIO 2: IF BJP LED NDA GETS AROUND 320-360 SEATS
Pasi’s View: Expect the market to remain at the same level or to rise slightly. As the Option premiums are already expensive, we will prefer to go for a credit strategy with higher room on the upper side.
Strategy: Short Iron Condor with wider room on the higher side (For 6th June expiry)
Short PUT 22200
Short CALL 23200
Long PUT 21700
Short CALL 23800
Total credit should be higher than 181.50 points (Rs 4,537 per lot)
Breakeven Points: 22,019 and 23,481
Maximum Profit: Rs 4,538 per lot.
Maximum Loss risk: Rs 7,963 per lot
SCENARIO 3: IF BJP LED NDA GETS AROUND 280-320 SEATS
Pasi’s View: Expect the market to remain at the same level. As the option premiums are already expensive, we will prefer to go for a credit strategy with a non-directional trend.
Strategy: Short Iron Condor (6th June Expiry)
Short PUT 21900
Short CALL 23100
Long PUT 21500
Short CALL 23500
Total credit should be higher than 157.55 points (Rs 3,938 per lot)
Breakeven Points: 21,743 and 23,257
Maximum Profit: Rs 3,938 per lot.
Maximum Loss risk: Rs 6,062 per lot.
SCENARIO 4: IF NDA FAILS TO FORM GOVERNMENT
Pasi’s View: Expect the market to plunge. As the option premiums are already expensive, we will prefer a credit strategy with a non-directional trend to a bearish view.
Strategy: Short Iron Condor with wider room on the lower side (For 6th June Expiry)
Short PUT 21800
Short CALL 22800
Long PUT 21600
Short CALL 23400
Total credit should be higher than 233.45 points (Rs 5,836 per lot)
Breakeven Points: Upper side 23,033
No risk on the lower side.
Maximum Profit: Rs 5,836 per lot.
Maximum Loss risk: Rs 9,164 per lot.
Overall Pasi will bet on a sideways to moderate bullish trend.
“During election result day, as the vote count begins, expect intermittent swings. Keep your stop losses wider (with a buffer) to absorb those sharp moves. For the Nifty, my important level on the lower side is 21900-22000; on the higher side, it is 23400-23500,” he added.
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