Unlocking Election Week Trading: Strategies for Profitable Moves

Prepare you self for Best Outcome in Coming Days

Thu May 30, 2024

Introduction:

Election week presents both challenges and opportunities for traders and investors alike. In this blog post, we'll explore key strategies and insights to unlock profitable trades during this critical period in the market.

Understanding Market Dynamics in Election Week:

The market has likely factored in the NDA forming the government, but what matters is the government's stability, which we'll gauge from the June 1st Exit Polls. Excitement only lasts until results are known. If outcomes match expectations, the thrill fades, as seen in the 2019 elections. The market oscillates between optimism and caution, driven by volatility and expectations.
The India VIX at 23, declining, signifies declining volatility. Market expectations from election results dictate strategies:

If NDA gets below 300 seats, expect a temporary dip to 21800. If between 300-330 seats, market consolidation between 22400-23200.
Above 340 seats, every 10 seats add 100 Nifty points, up to 23574.
Near 375 seats, Nifty could rally over 500 points.

FYI- NSE has set a Circuit Limit for Index, Which means NSE and BSE are expecting High Volatile Movement.

So, what's the trade strategy for May 31, 2024?

In derivatives, consider three options strategies:

1:0.5 Risk-Reward Script: Expecting a 5% index movement.
- Bank Nifty: BUY PE 48500 & BUY CE 49000,
  Max. Profit on 5%- ₹ 13000-15000
  Max. Loss - ₹ (24500)
- Nifty: BUY PE22500 & BUY CE 22600,
  Max. Profit on 5%- ₹ 11000-12000
  Max. Loss - ₹ (18,154)
Low-Risk Non-Directional: Betting on the index staying in a range.
Considering Strike with High OI.
- Buy: 47000 PE, 47500 PE, 50000 CE, & 50500 CE.
- Sell: 49000 CE, 48500 PE, 48000 PE, & 49500 CE.
- Max. Profit (Range 47600-49900): ₹18,000-19,200, Max. Loss: ₹(10,154).

Sectoral Focus for Maximum Returns:

Identifying key sectors such as Railway, Defence, PSU, Infra, and others can provide lucrative investment opportunities.

Building a diversified portfolio with two stocks from each sector allows investors to mitigate risks and capitalize on sector-specific trends.

Investment Options Beyond Trading:

For investors looking beyond trading, mutual funds offer exposure to special opportunities and business cycles for mid to long-term gains. Short-term liquidity options such as liquid and ultra-short-term funds provide alternatives to traditional bank FDs.

Conclusion:

In conclusion, election week trading requires careful timing, strategic planning, and sectoral focus. By understanding market dynamics and leveraging proven strategies, traders and investors can navigate volatility and capitalize on opportunities for profitable trades.

Karthik Rao
Trader & Investor