Trading in Equity Options Contracts Using Bollinger Band with special Reference to NSEs Nifty Options in India
Published: 2019
Author(s) Name: Pinkal Shah |
Author(s) Affiliation: Professor in the area of Healthcare Management at Department of Management, Sumandeep Vidyapeeth
Locked
Subscribed
Available for All
Abstract
Trading in option contract is found to be more complex and challenging as
compared with other segment of Indian Equity Market. It may be due to
immense fluctuation in the option prices.Volatility in prices is one of the
important factors causes this type of changes of option pricing. This volatility
shall be traced by using momentum indicators of technical analysis.Bollinger
Band is one of the tools of technical analysis which helps in ascertaining
momentum and give hint about future volatility in prices.The present study aims
to test trading system using Bollinger Band to trade in option contract by
addressing to the volatility in prices. For this purpose, historical data of NSE‘s
NIFTY index was tested on stipulated rules of Bollinger Band indicating strong
momentum and accordingly creating long position in corresponding In
TheMoney option contracts. The risk and return of using this trading
mechanism in NIFTY option was calculated using Return, Maximum Loss Zone,
Average Gain to Average Loss Ratio, Strike Rate (Success rate) and its
significance. The results are found acceptable for aggressive traders with time
frame of two weeks in option contracts.
Keywords: Option Trading, Technical Analysis, Technical Trading System, Bollinger Band
View PDF