Decision making in intraday index options trading: A parametric approach

Abstract

Nowadays, the Indian index options have a significant participation to the derivative market. It is becoming more popular among traders. The Index options were launched on 04 June 2001. However the options were launched around 2001 but real liquidity and volatility was seen in 2006. It has two variants i.e; Call option and Put option. As the index moves in upward direction, the value of Call option increases and as the index moves in downward direction, the value of Put option increases. There is a misconception that only option sellers make profit and option buyers always loose. However an option buyer has limited premium loss and unlimited profit from the market. It is very difficult to predict the live behavior of the market. The purpose of this paper is to not only predict but anticipate the possible movement of the market and hence index options such as Nifty and Nifty Bank. In this paper, some parameters have been proposed to make a certain decision for the movement of the market. These parameters help to assess the stock market current state and make decisions for further movement and increase the confidence level of traders.