An Empirical Study on Options Trading Strategy Using ‘Commodity Channel Index’ For NSE’s Nifty Options in India

16 Pages Posted: 28 Jan 2019 Last revised: 25 Apr 2019

Date Written: January 6, 2019

Abstract

Though volume of option trading, specifically in NSE’S NIFTY Index contract, rise significantly over a period of time, it is considered as comparatively complicated due to complexities involve in option. pricing. Volatility in prices play very critical role in option pricing. With help of momentum indicators of technical analysis, one can identify point of expected high amount of volatility in prices. This lead to very high amount movement in option prices. Commodity Channel Index (CCI) is one of the tools of technical analysis which helps in assessing momentum and give hint about future volatility in prices. The present study aims to trace significant (at least double) rise in option price with minimum risk using CCI. For this purpose, historical data of NSE’s NIFTY index was tested on stipulated rules of CCI indicating strong momentum and accordingly creating long position in corresponding in The Money 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 positive about CCI based trading in option as per stipulated in rules for aggressive traders with time frame of two weeks.

Keywords: Option Trading, Technical Analysis, Technical Trading System, Commodity Channel Index (CCI)

Suggested Citation

Shah, Pinkal Kishorbhai, An Empirical Study on Options Trading Strategy Using ‘Commodity Channel Index’ For NSE’s Nifty Options in India (January 6, 2019). Proceedings of 10th International Conference on Digital Strategies for Organizational Success. Available at SSRN: https://ssrn.com/abstract=3323746 or http://dx.doi.org/10.2139/ssrn.3323746

Pinkal Kishorbhai Shah (Contact Author)

Sumandeep Vidyapeeth ( email )

At & Po Piparia
Tal: Waghodia
Vadodara, Gujarat 391760
India

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