Check List – Preparation for Election Day Trading

Dharam Chand Sethia Uncategorized Leave a Comment

23rd May 2019 – Thursday, is elections result day in India.

India is going to find her Prime minister for next 5 years (most probably). For the stock market enthusiast this day is going to be very important as –

Volatility will become volatile

These days attract all type of participants.For few people in the past elections day -there fortunes changed and for some it’s time for vacations on these event as per their risk management system.

As a trader who has joined recently,and witnessing elections for the first time – what shall he/she be doing? What shall be on his/her checklist.

Checklist-

A). Find last 2 elections date.

B). If possible get an intra-day chart of that day.Spend time with the chart as if history will repeat.

C). For options trader – download bhav copies of 20 days prior and 10 days later to the date.(nseindia.com)

D). Check Straddle values, calculate implied volatility going into elections.

E). Create your own hypothetical trades and various scenarios – for e.g.how will you react if volatility persists and doesn’t drop on the same day.

F). Find challenges in your execution- these are days where you will be tested for your execution skills more than the trade idea generation skill.

Execution matters

One big difference in previous elections Vs this election is – Hyper Active Weekly Option Market in USDINR,Nifty and Banknifty – all macro products.Wrong execution will have very less probability of success where as right execution will still have larger probability of success in my opinion.

G) What is right execution and how to do it?

  • Alternate broking account
  • Sufficient liquidity available for margin – check with brokers also, sometimes due to their shortfall in margin you may suffer.
  • Good internet connectivity, if possible take another subscription for a month.
  • All upgraded software/charts/codes.
  • Electricity Back-up. Yes you heard me right.
  • Running what -if – scenario in case there are back to back circuits and markets halt/closes for the day.
  • Position-Sizing.
  • These are days that algos will be hyper active- lot of stop loss algo may alter the genuine market micro-structure for a brief moment -for e.g. on the first surgical strike announcement the usual debit spreads were available for good amount of credit.
  • Run the extreme scenario in your mind and check with your own reactions – this will help you in position sizing and exiting the trade.

To my mind elections result day will be the toughest test of your execution skills.

 

Theses were my own experience of last 2 elections.Do share your own in comments,will be helpful for all.

All the best traders.Happy trading.

 

 

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