Election result vol trade
Election results are among the few events that can move Indian markets sharply in a single morning, and option premiums often swell in the days before the count. This event strategy tries to capture that build-up. It buys a NIFTY at-the-money straddle a week before a counting day and sells it either when implied volatility spikes or at 09:30 on the count morning, before the post-result volatility crush.How it trades
Results
PRE-BUILT · DEFAULTSWhere it made and lost money
Two events are far too few to say anything about market conditions. The November 2025 trade, entered with India VIX in the normal band, made ₹1,301 while NIFTY rose more than 1% over the holding week. The May 2026 trade, entered with VIX above 14.5 after a trend day, lost ₹10,725 while NIFTY stayed within 1%. That second result shows the mechanism the idea depends on: a bought straddle needs either a large move or a jump in implied volatility before the count, and without either it simply decays for a week. Figures are before costs.
About this strategy
- Keep a list of election counting days. In the test window there was no general election, so two large state counts were used: November 2025 and May 2026.
- Five trading sessions before a counting day, at 15:15, buy one lot each of the ATM call and put of the monthly expiry that covers the count.
- Every minute, check the average implied volatility of the two legs; if it reaches 60%, sell both.
- Otherwise sell both at 09:30 on the counting day. There is no stop loss.
- An alternative mode instead sells the straddle on the counting day and holds it for five sessions to capture the volatility cool-off.
Why traders use it
Traders often observe that implied volatility rises into a big scheduled event and collapses once the result is known. Buying ahead and selling into the peak aims to profit from that rise, rather than from guessing the result. The alternative mode takes the other side, selling after the result when volatility tends to fall. Both are simple event-study templates that can be run whenever new counting dates are added.
The year in plain words
With default settings on NIFTY from 1 Oct 2025 to 30 Sep 2026, only two counting days fell in the window, both state elections that move NIFTY far less than a general election. The November 2025 straddle made ₹1,301 and the May 2026 straddle lost ₹10,725. Neither reached the 60% implied volatility exit; both were sold on the count morning. The total was a ₹9,424 loss before costs and ₹10,208 after ₹20 per order and bid-ask slippage. Two state events cannot test the idea; it needs general-election data.
What the settings do
Risks
- General elections happen only once every five years, so real tests have one or two events.
- If volatility does not rise before the count, a week of time decay is lost.
- The short-after mode sells options right after a big event, when moves can still be large.
- Counting dates must be entered by hand; the default list has no general election in this window.
Who it suits
Traders who study event volatility and want a ready-made template for future election counts, understanding that it is a framework for testing rather than a tested edge.
Questions traders ask
Does India VIX rise before election results?
It often does before general elections, as traders buy protection against a surprise. State elections usually have a smaller effect on NIFTY. This backtest's two state events did not lift implied volatility to the 60% exit level.
Is buying a straddle before election results profitable?
In this test, two state-election trades lost ₹9,424 before costs and ₹10,208 after ₹20 per order and bid-ask slippage. That is far too small a sample, and past results do not guarantee future ones.
What is IV crush after election results?
Once the result is known, uncertainty falls and implied volatility usually drops sharply, cutting option prices even if the market moves. That is why the strategy sells by 09:30 on the count morning.
Can I sell options after the election result?
Yes, the short_after_count mode sells the ATM straddle on the counting day and holds it for five sessions, aiming to profit as volatility settles. It carries the open-ended risk of any short straddle.