Trading options on election results day

June 3, 2024

The Indian elections are the mother of all events. This is the event with the highest level of uncertainty, as the rising VIX and option prices have been telling us. Every trader’s question is simple: What do you do on this day, and more importantly, what do you not do on this day?

Election day analysis

The Indian market has opened with a big gap up on the back of exit polls as I am writing this. From here, there are three possibilities:

    • The actual poll results are way better than the exit polls. This is a low chance, as the exit polls have given a big majority to the NDA, and it is difficult to have better results than that.
    • The actual poll results are consistent with the exit polls, indicating that the market may be range-bound.
    • There will be a surprise in which the actual poll results can be lower than exit polls. This may trigger a sell-off, as this is a complete shocker. Even if the NDA has a majority, if the margin of victory is small, the market may take it negatively. This is the territory of “the impact of the highly improbable.”


Implied volatility is very high. If you did not understand that, don’t worry. All I am saying is that the option prices are very high. Why? Because people who sell call options are scared the market will go violently up, so they will not sell them for cheap. And people who sell put options are scared the market will go violently down, so they will not sell them for cheap. What does that mean? Options are going to be very expensive, and it is not easy to make money buying them.

Realized volatility might also be very high. What does that mean? There will be a lot of up-and-down moves as the uncertainty is high. This means that if you are trading with small targets and tight stop losses, no matter whether you are bullish or bearish, chances are that you will be stopped out on both sides.

Bid-offer spreads on some options will be wide, and long-term options might be illiquid. This is because no one wants to take a position and get stuck without a timely exit. There is a risk of gaps when the actual results come out. This means that you cannot trade with a stoploss because your orders may not go through at the desired price. Oh, and it is difficult to sleep if you have futures or naked options sold tonight.

Dos and don’ts

  1. You do not have to trade on election results day. There is no glory or wisdom in betting when there is high uncertainty. You can make money peacefully by trading on days with high predictability. So if you want to trade, you can. But there is no compulsion, and it might even make sense not to trade. Do not trade out of the fear of missing out on something big. Understand that the market will always be there, giving you opportunities.  
  2. Trade with a small position size. Even a small position can make you a lot of money if the move is large.
  3. Avoid naked selling of options. There can be large swings. You might eventually be right and make money, but it will not be easy to hold on to a large negative MTM and handle all that stress if a big move comes against you
  4. Please avoid buying both calls and puts expecting something to happen. As we explained earlier, the option prices are very high. So you might not make money because the price you paid to buy those options is difficult to recover, even with big moves.
  5. Trading with tight stop losses. Trying to capture quick moves might be a bad idea. Random swings can take out your stop losses on both sides.
  6. Unhedged overnight positions, particularly futures and naked selling options, are risky. Of course, there could be a big risk of a gap, and the financial advice here is that this is not good risk management. More importantly, it is mental health advice: Why take stress? Why lose sleep?
  7. Stay away from relatively illiquid options. Entry and exit might be difficult.
  8. Be careful with market orders, especially with illiquid options like some stock options and faraway options. The bid-offer spread might be wide, and it might not be worth it.

The big question

I can’t tell you what to do, but I can tell you what I would do if I were to handle this. I would prioritize peace of mind, low stress, and risk management. I would also avoid a trade that could completely wipe out my capital. If I put it that way, I do not have too many options. As in choices, not the F&O waala options 🙂

My only practical choice is to do option spreads. So this is what my step-by-step guide is:

  1. Try to avoid my temptation to trade on election result day.
  2. Try very hard, fail, and decide to take a safe trade 😉
  3. Tell myself, “Okay, if I really want to do this, I will make one trade.” And I will either be right there or wrong there; I will make my peace with it. But I will avoid degen trading—not too many trades, no intraday in and out, no churning, no scalping, no crazy-stunts.”
  4. For that one trade, do something that gives me a decent amount of reward without taking a huge risk.
  5. This lands me on fully hedged option trades with limited risk and reward.
    • Bull Call Spread or Bull Put Spread for an up move
    • Bear Call Spread or Bear Put Spread for down move
    • Short iron condor for range-bound
    • Long Iron condor for a violent move up or down

Why trade options spreads?

  1. Limited reward, limited risks—peace of mind.
  2. Cheaper than buying options and way safer than selling options
  3. No matter how much the market moves, I will not be worried about huge losses. Why? My maximum loss is limited.
  4. I will not worry about the gap up or down, either, because, again, my maximum loss is limited.
  5. I do not have to worry about stop-losses if the market swings wildly. Why? You guessed it right 🙂 The max loss is built in, and the max loss can act as my stop loss.

So that is that. My idea is to do one trade for tomorrow—either long, short, range-bound, or volatile—through a spread. And hold it. If I am wrong, I will be wrong once and lose money. But at least I will not do tens of trades and lose too much money. 

Alright, hopefully, with all this, I am going to sleep peacefully. See you all on the other side.




CEO, and co-founder at Sensibull

Post a comment

  1. Karthik says:

    It is saddening to see that Zerodha publishes blogs from authors who are biased with their views about stock market.

    This author runs a daily youtube channel show for post market analysis
    looking at different inputs which is informative but the author always express his bias towards the market in all communications.(read between the lines) Experienced learnt people in the market can understand and wont follow others views about market but there are so many of new members are now into the market and they can fall prey for his views.

    He officially also put in his twitter profile, he is chairman of DEC PUTS Association and made a post about the same. This clearly shows the proof about his bias.

    My sincere request to Zerodha as a client for more than a decade.
    Please be mindful about publishing content in your paltform. People like Karthik Rangappa and Varsity team blogs are fine instead of from biased authors.

    Also, if the authors company is a partner of Zerodha, do share the feedback and you can positively influence him not to express his bias in his post market analysis but be newtral about market. There are so many Zeridha clients watching that show.

    Appreciate all the Varsity initiatives of Zerodha recent one being Varsity Live. Thank you.

  2. Shivam says:

    Why do u keep blocking buying of options after a particular strike saying OI filled!! U guys take position and don’t let us trade buying of options!!

  3. Idioms says:

    It sounds like Zerodha provided valuable insights regarding trading in volatile markets, and their blog post proved to be beneficial for understanding the dynamics. It’s great that you found their advice helpful! Their expertise can certainly be a valuable resource for navigating the unpredictable nature of financial markets.


  4. Bala KJ says:

    Rightly said, i had planned just one trade, which i took yesterday. My trade is long calendar with calls for this expiry on BNF with just 1 lot. just morning exited that trade with minimal loss at 3600 INR, was happy with giving it to loss, since next couple of days would get the clarity with price action and candle formation.
    I truely believe, there’s better trade opportunities provided by market in near future. Never felt bad for missing out the gap opening last day and today the gap had been filled at morning 30mins candle., missed the gap filling trade too.

    But true to say, as trader there wasn’t better risk management for past few days, even though the opportunities are big and the known upper targets were achieved in both NIfty & Bank Nifty but couldn’t be a part of that ride. It happens, more than opportunities, the trade discipline that makes me to survive barely enough. so no regrets. 😉

    Hope after all these news and events setsoff, there will be a directional opportunity, Having patience and observing.

  5. Santosh Srivastava says:

    I feel that posts are more focussed on Optioans/Futures. Requesting a focuss on Cash traders/investors also.

  6. Kaushalya says:

    Good. Lighthearted. Well done.

  7. Amarnath M says:

    with all the memes and hinglish humor, I understood that the writer was Abid. didn’t have to scroll all the way to the bottom to know that 😀

  8. Anuraag says:

    Yes, thank you for showing that yellow signal. Such things really help especially the new traders. Thanks

  9. Nitin says:

    Instead of Trading options, it is best to buy ETFs on low and sell next day (BTST) or sell when your indicators tell there is possible correction (Swing trading). This also generate good returns without any risk, because there is no risk in ETFs

  10. Aslam says:

    trading on SBI tmrw

  11. Bharath ag says:

    What is the purpose of this article, when zerodha used to hangs and shows technical glitches on event days, people anyway unable to trade.
    No point of writing essays how not to trade, zerodha taking care of it.

  12. J. Mandi says:

    Thank you for the heads up. 🙂

  13. Narendra Mode says:

    Abki baar Nifty 25,000 par mitro

  14. Iqbal Singh says:


  15. Rahul says:

    In easy options, kindly give trades for next expiry also.

  16. aju says:

    Abid, bro adipoli post 👏🏻

  17. heker hai bhai hemker says:

    nifty will fell 20% 2moro

  18. Ajay Mehta says:

    Thanks Abidji. I tried my best to restrict trading today. Even tomorrow also just wait and watch as you advised

  19. vinod says:

    1…The Indian elections are the mother of all events.
    2…rising VIX and option prices
    3…The Indian market has opened with a big gap up on the back of exit polls
    4…The actual poll results can be poor and This may trigger a sell-off
    5…if the nda margin of victory is small, the market may take it negatively
    6…the option prices are very high
    7…Trade with a small position size
    8…Avoid naked selling of options.
    9…avoid buying both calls and puts expecting something to the price is high
    10..Trying to capture quick moves might be a bad idea as Random swings can take out your stop losses on both sides. one trade for tomorrow—either long, short, range-bound, or volatile—through a spread. And hold it. If I am wrong, I will be wrong once and lose money. But at least I will not do tens of trades and lose too much money.
    12..Alright, hopefully, with all this, I am going to sleep peacefully. See you all on the other side.
    13..description to synopsis for easy understanding

  20. Jayendrasinh Vadher says:

    Investing in the stock market can be both exciting and challenging, so were grateful to receive a meaning full peace of advice, thank you Abid ji.
    4th June is no trade zone for me, lets do big on 5th (:

  21. Santosh says:

    Thank you for the important info.