Looking through Events,Case Study- Yes bank

Dharam Chand Sethia Blog Leave a Comment

Yes bank has been in news for not so good reasons in past.Resignation from top posts,RBI’s orders have jolted the share prices heavily.

“There are people who would love have your bad days” – Not intentionally though.Option traders are one such small breed. If any stock (in FnO universe) is having bad time ,Options trading activity pick up heavily & the same happened with yes bank too.Options volume, Open Interest and Implied Volatility rose heavily in last 2-3 months compared to its past.This post is about Volatility w.r.t Events/Announcements.

On 21st nov Yes Bank announced the next board meeting and its agenda and so the volatility was high in expectation of further news.

 

yes bank 1st meeting

 

The next meeting was scheduled on 13th dec.It happened and the announcement came well within market hours(before 3:30 PM).

 

yes bank 2nd announcement

 

One of the expectation in the market was name of the CEO.It didn’t happen and got postponed to 9th January. Stock fell and recovered next day.However what didn’t recover was Volatility.

Implied Volatility in yes bank is running high since the direction by RBI about change of guard.This month also markets were expecting announcement about new CEO. As soon as the market got to know that the appointment is not done, and it has been postponed till next month,Prices and Volatility both fell together. Though Implied Volatility is still high but it has come from above 90 levels to below 80 levels.Let us see this in picture.

 

Yes bank Fall in Volatility

 

Generally an option trader finds events in Earnings season, but sometimes these events keep them busy throughout the year.In the case of Yesbank we can see that as soon as the announcement date shifted to next month & no CEO appointment,Implied Volatility fell.Good for Volatility Sellers.

Tracking the events/announcements is very important in our business of trading.

 

 

Inputs are welcome.

Happy Trading!

 

 

 

 

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