Poll vault.  Option traders caught off-guard by EC setting June date for poll results 

Prices of Nifty and Bank Nifty options across the strike prices crashed today, as traders did not expect the election results to be announced in June. Generally, traders accumulate positions ahead of volatile events such as elections, budgets etc. Likewise, this time, there was huge build-up in May options, betting on the election outcome.

The results of the previous five elections were announced in May. In 2004, they were declared on May 13; in 2009 and 2014, they were announced on May 16, and the last election results were announced on May 23.

However, On Saturday, the Election Commission announced a seven-phase election schedule, from April 19 to June 1, with counting on June 4. The May Nifty contracts on the NSE expire on 30 (Thursday,) while for Bank Nifty, they expire on 29 (last Wednesday).

The option prices Nifty50/Bank Nifty May contracts tumbled today for both call and put options and across the strike prices i.e. the-money and out-of-the-money). The NSE Nifty rose by 32.35 points or 0.15 per cent, to 22,055.70 and moved in the 21,916.55-22,123.70 range.

According to analysts, many traders used to bet on the exit poll announcement (which will be on the last date of the election) and on results day. With the results being shifted to June 4, most traders were forced to unwind their positions.

Most traders deploy strangle or straddle strategies on Nifty and Bank Nifty. These strategies are best suited during volatile phases when the market direction is uncertain, they added. With the results shifting to June, most traders were forced to unwind their May positions.

Rahul Ghose, CEO, Hedged.in, said: “The common trade for the election currently created by traders is short strangles at the 21000 and the 24000 strikes both for June and December expires in 2024. The open interest build-up is suggesting the same and the sideways movement of the last couple of days has led to eating premiums already having started on both sides.”

However, India’s Volatility Index, or VIX, closed higher at 13.59 today but down from a recent peak of 15.

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