Evaluation of Options Trading Strategies in India

Abstract

The past decade has witnessed an explosive growth in the use of financial derivatives by a wide range of corporate and financial institutions. This paper evaluates two of the commonly used options trading strategies (i.e. Butterfly and Straddle strategies) for a sample of 10 stocks each over the period Oct-Feb 2008. Butterfly and Straddle strategies are opposite to each other. While Butterfly strategy applies to least volatile stocks, Straddle strategy applies to highly volatile stocks. The results show that both the butterfly and straddle strategies are not working well on consistent basis in Indian market.