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Below the Quote on Oath Taking & VIX Crashing 30% by Shrey Jain Founder & CEO SAS Online – a deep discount brokerage platform

The volatility crush we have witnessed on Wednesday points to smoother times ahead and further range becoming narrower as the NDA will have oath taking ceremony on 8^th June. This brought a positive sentiment with nifty rebounding to 22570 levels and Volatility subsiding.

Nifty witnessed gains and settling the three-day price action to net 0.3% move till Wednesday. The most crush in IV was seen in early morning 2 hours of trading. With further positive developments of Govt formation IV crush will be steadfast unless any other news.

The volatility expansion is usually followed by volatility contraction and we believe Nifty is likely to trade in its previous week range of 22700 – 22300, which has been the range for most of May. The swings of +4% are now seen reduced to 1.5 to 2% with ATM IV dropping to 33.8 from 50 + Levels and now settling at 21.2.

OI analysis for 6^th June indicates concentration on 23000 – 22000 which is a much wider range given the reduced IV and further it can be squeezed to 22700 – 22300 as per price action. Also, We may see some selling pressure at higher levels of 22700 – 22800 as a V shape recovery is not expected until the govt is formed.

Given this, we recommend a bear Put spread for tomorrow’s expiry for Nifty. A bear put spread is a type of vertical spread. It consists of buying one put in hopes of profiting from a decline in the underlying stock, and writing another put with the same expiration, but with a lower strike price, as a way to offset some of the cost. Because of the way the strike prices are selected, this strategy requires a net cash outlay (net debit) at the outset.
 

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