Pre Market Report, April 9, 2020 | Stocks and Commodities

April 9, 2020
Time: 8 am

Pre Market Report:

1. Day before yesterday, Dow future was 900 points up just before the market open, but wiped out entire 900 points to close in negative.
2. Yesterday Dow futures was 200 points down before the market open, but wiped out the 200 points loss and ended more than 700 points higher.
3. The volatility still continues.
4. We are the worst volatile market yesterday.
5. Bank Nifty opened down 700 points, then shot up a whopping 2000 points and then fell about 1700 points.
6. Nifty opened about 200 points lower, then shot up 450 points and then came crashing down to break the days low.
7. But Dow closed above 23000, first time in last few weeks.
8. Same thing here, though markets are highly volatile, markets are significantly higher than the recent low.
9. SGX Nifty indicating about 120 points gap up right now.
10. Usually when markets show huge volatility the day before expiry, expiry day may not be volatile.
11. But we can not say anything in this kind of markets.
12. Even stocks like ICICI Bank was up 10% then down 10% yesterday.
13. No need to talk about stocks like IndusInd Bank.
14. NBFCs did well in yesterday's volatile market.
15. Yesterday the most surprising news was that FIIs were net buyers for Rs 1950 crores while DIIs were net sellers for Rs 1750 crores.
16. That explains the huge volatility yesterday.
17. But one by one, sectors are doing very well.
18. First it was Pharma and IT, later FMCG, now NBFCs.
19. So markets all over the world may not test the recent lows.
20. So every fall, it is time to sell Put options of 7500 and below.
21. Or sell May 7000 and below.
22. One good thing is that in another 3 weeks time, new margin rules will apply, so margins will be very less, if you hedge your positions by buying options.
23. May 7000PE is still trading above Rs 150, which gives 15% return in one and half month, even on full margin.
24. If VIX starts falling, premiums will fall drastically.
25. So now the strategy should be sell far OTM puts on every fall.
26. Call option premiums are not high, so there is no point in selling Call options.
27. To hedge Put positions, one can do Call ratio spreads.
28. Reliance has been resilient in this fall.
29. Sold 18000PE in weekly options, hoping to pocket the entire premium.
30. Sold 9000CE to wards the end, that may be in trouble, if market shoots up.
31. I am expecting good short covering, purely going by the FII buy figures.