InvestorQ : What should be my trading strategy ahead of elections counting on 23rd of May?
Dilmini Mercia made post

What should be my trading strategy ahead of elections counting on 23rd of May?

Answer
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Dhwani Mehta answered.
1 year ago


In a nutshell – Straddles for short term and consumption for medium term

Trading strategy has to be slightly medium than very short term. For Election Day counting the one thing you can do is to hedge your positions in the market and try to play the market with straddles and strangles (wherein you buy calls and puts). The only caveat for you here is that on such volatile days, the calls and puts are normally quite expensive so you will really require a smart movement in the market to be profitable. Otherwise, you will just end up losing the premium. Any directional position you take around the election counting time should be accompanied by a stop loss compulsorily as the volatility index (VIX) is already at very high levels of 26-28.

A better way will be to take a slightly medium term approach. If you believe that there is going to be a stable government at the centre, focus on sectors like banks, consumptions sectors like FMCG and NBFCs which could benefit from liquidity infusion. You can look at stocks like Britannia, Havells and Bajaj Finance as pre election buying stocks. Don’t expect them to deliver results in one day but keep a perspective of at least 2-3 months to be profitable in these positions.