Why Friday is a great importance in one’s life?

Friday has a special importance in the life for most of us. The mood at that day automatically gets relaxed. Mostly everybody looks forward to the day ending and plans for the weekend. For Mumbaikars, who generally have pretty hectic schedules during the course of the week, Friday brings lot of ease in their life. As for market participants it’s clearly  time to unwind. As I write to you about this on a holiday, obviously the feeling of that comfort shows up.

So, why I am talking to you about Friday, is it because I am in a holiday mood? Partly yes, but there is an ever bigger reason behind it, the launch of weekly options on Nifty post Bank Nifty. Clearly, weekly options on Bank Nifty has been a success story. I think weekly options on Nifty will be equally strong product. But more importantly it is the ease with which option traders will be able to protect, repair, top up or enhance their existing strategies.

While there are no changes in terms of the contract specifications as compared the monthly options, there are just two changes which one needs to note:

• Expiry Date: Every Thursday of the week. In case the Thursday is a trading holiday, the previous trading day shall be the expiry/last trading day. All contracts shall expire at the normal market closing time on the expiry day or such other time as decided by Exchange.
• Contract Cycle: 7 weekly expiry contracts excluding the expiry week of monthly contract. New serial weekly options contract shall be introduced after expiry of the respective week’s contract.

Now from a strategy perspective this clearly helps a lot. To mention a few advantages.

• Previously for any event, we had to pick options for that month, Inspite the fact that the event may be somewhere early or during the mid of the month. That issue gets resolved now, one can actually pin point the known event dates and play the event accordingly.

• This is not limited to playing the event. This goes a step further, to abstaining from an event. One can simply play weekly options for a week before the event week and eventually enter the market after clarity sets in.

• Further one create spreads between two weeks.

• The portfolio hedging cost comes down dramatically as one needs to buy hedges for the particular week only.

• One can hedge the strategy in an event that a particular week seems to be against the existing strategy. For instance buyer of a monthly option can sell some weekly options in case there is a week which is expected to be slow or truncated. Also, the seller of a monthly option can buy some hedge in case a week seems to be very volatile.

• If a strategy is doing well one can create small top ups and improve the RoI substantially.

• Writing options will become slightly more manageable as one can take weekly view and create positions. The value at risk automatically comes down. Though this down mean that one takes away the risk guard.

• As compared to intraday trading where it is extremely stressful at times and one tends to miss the big moves this a better option and not too much of an extra investment. So, it is good balance between holding options till expiry and playing intraday.

So, now every Friday as you relax awaiting the weekend, please add a probable quick trade to your to-do list.

Happy Trading.

Cheers!!!