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Article

Nifty Volatility Using Neutral Strategies

Manu Sharma and Rouhi Gopal
The Journal of Wealth Management Fall 2018, 21 (2) 118-127; DOI: https://doi.org/10.3905/jwm.2018.21.2.118
Manu Sharma
is an assistant professor at the University Institute of Applied Management Sciences (UIAMS) at Panjab University in Chandigarh, Punjab, India
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Rouhi Gopal
is a post-graduate from the University Institute of Applied Management Sciences (UIAMS) at Panjab University, Chandigarh, India
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Abstract

This research analyzes derivative strategies that have been applied on the Nifty IT index, which is one of the sectoral indexes under Nifty. It involves the application of derivative strategies on five years of historical data of the Nifty IT index and determines their profitability. Two strategies have been used for this purpose: long straddle and short straddle. The success rates of the two neutral option strategies have been computed. The research aims to identify the strategy that can be consistently applied on the Nifty IT index in the future to generate profits. Payoff graphs for the most recent months have also been generated to complement the findings of this analysis. The results suggest that the success percentage of a long straddle strategy has been around 40% and that of short straddle around 60%. The authors conclude that the market is more bearish on volatility for the Nifty IT index. The short straddle strategy was more successful than the long straddle strategy for the period studied. Therefore, of the two strategies, the short straddle seems to offer the best prospects for neutral trading on the Nifty IT index in the future.

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The Journal of Wealth Management: 21 (2)
The Journal of Wealth Management
Vol. 21, Issue 2
Fall 2018
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Nifty Volatility Using Neutral Strategies
Manu Sharma, Rouhi Gopal
The Journal of Wealth Management Jul 2018, 21 (2) 118-127; DOI: 10.3905/jwm.2018.21.2.118

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Nifty Volatility Using Neutral Strategies
Manu Sharma, Rouhi Gopal
The Journal of Wealth Management Jul 2018, 21 (2) 118-127; DOI: 10.3905/jwm.2018.21.2.118
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  • Article
    • Abstract
    • NEUTRAL OPTION STRATEGIES
    • PERCENTAGE CHANGE IN NIFTY IT DURING FIVE YEARS (2012–2017)
    • LONG STRADDLE ANALYSIS
    • SHORT STRADDLE ANALYSIS
    • PAYOFF GRAPHS FOR LONG STRADDLE FOR MOST RECENT MONTHS FROM JANUARY 2017 TO JUNE 2017
    • LONG STRADDLE PERCENTAGE SUCCESS OVER A PERIOD OF FIVE YEARS
    • SHORT STRADDLE PERCENTAGE SUCCESS OVER A PERIOD OF FIVE YEARS
    • CONCLUSION
  • Info & Metrics
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