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Charts & Analysis

Ooh, I Spoke Too Soon on No Volatility in 2013

Remember when I said that there were no 2% days in 2013, and I was worried? That was April 10,  we’re now just two months and 10 days ahead, and we’ve already had six 2% days since.

What I said then was:

The answer, perhaps, is that this is a lull for stocks, and we are likely to see dramatic changes in volatility in the coming years. The “zeroes” in 2013 in the above charts strike me as particularly dangerous: We are likely to see a lot more volatility later this year, and probably in all coming years.

The zeroes in 2013 have now gone. We’re still not anywhere close to the volatility seen earlier, but we’re definitely on the journey:

2% days on the Nifty

I’ve traded the lack of volatility using options, and I think there’s a lot more volatility to come. However, it’s unlikely to all be in one direction, and options remain cheap.

  • Vamsy says:

    I believe the main reason was the open interest in ATM and OTM strikes that was subsidizing the options causing lower option valuations. I used to ( a long time back) make merry with naked option writing, those days are gone. Many times I simply did not do any trade for an entire month because of lack of risk premiums for options. Again, we need to see what happens when the market crashes so hard that all the margins for the option writers are gone. I was laughing the other day when I saw there was no premium for 5500 call and the margin for Nifty futures was around 34K!
    1.5% premium for put option for Index is too low. I am very interested to see what happens when Nifty drops 5% for a single trading session and the biggies do not get time to close their open positions.

  • nishant says:

    picture abhi baki hain mere dost!!!