How to trade on Union Budget Day

As you all know, we around the Union budget in 2020. We will have it on 1st February 2020. Volatility is swinging like anything. Most of the traders are uncertain about the direction of the market during the budget. The direction of the market depends on the suitcase of the Union Finance Minister. If good news comes out we may see 40-50 points up movement. Bad news can damage 70-90 points in no time.

The unpredictable movement in the stock market not only occurs on budget day but we can witness such can kind of movement on some big news as well. This makes very though day for intraday traders. So here I am posting some guidelines for budget day trading.

High Volatility: The market may face a swift up or sharp fall. The markets react on every minutes details of the budget and move cannot be predicted even by expert easily.

Lesser Risk Reward: Generally, higher margins are needed for intraday trading on that day. Higher margin introduces lesser risk-reward ratio.

Avoid Force Trading: As there are huge movements in the market, traders are unable to control their emotion and throw their selves into force trade where they burn a good amount of money as the price they get changes sharply.

The Volatility Crash: During budget volatility goes skyrocketed so the premium. Once budget completed, volatility starts cooling down, premium falls drastically. This might be mouth-watering thing for the option sellers but this is not the case Delta still make some damage for them.

So better to trade with some strategy, where your risk is capped, whatever the movement is!

Here You can go for multi-legged option strategy. You can buy 31000 Ce and 30400 Pe and same time you can sell 31600 ce and 29900 pe. This strategy will give limited profit when the bank nifty mobes sharply in any direction. Profit is limited also your risk is capped.

**These strikes are depended upon the closing of the Bank Nifty. This strategy has been made on last day closing.

The best strategy to trade on budget day is not to trade when you are uncertain about anything.

What is your strategy for trading Union Budget? Don't forget to share with us in the comment section.

Disclaimer: This post is education purpose. Do your own analysis or ask your financial adviser before going for the trade.

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