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Performance Analysis of Volatile Strategy under Indian Options Market

Author

Listed:
  • Deepika Krishnan

    (Ph.D. Scholar, Faculty of Management studies, University of Kerala, Thiruvananthapuram, Kerala, India.)

  • Raju G

    (Associate Professor, CET School of Management, College of Engineering Trivandrum, Kerala, India.)

Abstract

Options strategies are used to minimize the risk by profiting from either direction of call and put. Traders need to analyse the market to identify a perfect strategy which can stand still in the volatile market. Volatility is the key issue in themarket and this formulates new strategy to minimize the risk. Straddle and strangle are best suited volatility strategy as per the options market experts. Hence, a question is raised, which strategy generates higher positive return under volatile conditions. Therefore, a performance analysis is undertaken based on the individual merit and market conditions using Sharpe, Treynor and Jensen’s alpha ratios. Daily data is collected from 2010 to 2016 by taking near, next and far month maturity contract of European call and put options. The finding indicates that when uncertainty about the market is more, it is better to take strangle strategy. Hence, the traders have to decide the strategy after analysing the market conditions. JEL Classification: D81, G11, G32

Suggested Citation

  • Deepika Krishnan & Raju G, 2018. "Performance Analysis of Volatile Strategy under Indian Options Market," Indian Journal of Commerce and Management Studies, Educational Research Multimedia & Publications,India, vol. 9(1), pages 87-94, January.
  • Handle: RePEc:aii:ijcmss:v:09:y:2018:i:1:p:87-94
    DOI: 10.18843/ijcms/v9i1/12
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Jensen; Sharpe; Straddle; Strangle; Strategy; Treynor.;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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