Volatility Trading Strategies: Profiting in Up and Down

In this article, we will discuss

Fast-moving markets can bring several profit-making opportunities for investors. However, as fast as the market may rise, it may fall as easily, creating huge losses. Thus, to minimise risks and maximise gains, it is essential for individuals to know the right tactics. 

In this regard, here are some of the most tried and tested trading strategies which you can use during different levels of market volatility. 

5 Best Trading Strategies for Volatile Markets

Here are some of the best trading strategies which you can use during different degrees of market volatility: 

During neutral to bearish share market conditions, you can consider using the short call trading strategy. Here, you sell a call option in order to buy the underlying security for a specific price in future. 

Your profit potential is limited to the premium received. However, if this underlying’s trading price crosses its strike price on expiry, there is a chance of heavy losses. You can initiate this strategy by selling 1 OTM/ITM/ATM call option with the same underlying asset and expiry dates. You can adjust your strike prices as per your preference.   

  • Long Put

When you are expecting stock prices to decline due to high market volatility, then the long put trading strategy is for you. Risk in this case is limited to the premium paid and the profit potential is unlimited.  

To execute this strategy, you need to buy an ATM put option. Now, if the underlying asset’s price falls, the put option will be ITM, thus having an intrinsic value. So, as long as the asset price falls, your profits will keep on increasing. Alternatively, if it starts rising, the option will expire worthlessly, making your loss equal to the premium paid.   

You can execute a short straddle when you expect the stock market volatility to drop significantly by the option’s expiry date. To do so, you need to sell 1 call option and 1 put option, having the same strike price, underlying assets and expiry dates.  

When there is minimal movement in the underlying asset’s price upon expiry, both options expire worthless. Thus, you earn profits from the premiums received, after deducting the commissions. 

Now, if asset price moves downwards on expiry, loss potential is limited. This is because the stock’s price can fall to zero. However, in case it starts rising, loss potential is unlimited.  

  • Ratio Writing

This is a neutral trading strategy in which you need to sell more call options than the number of shares you hold. It has limited profit potential with unlimited risks and can be used as a risk management strategy when you are expecting low short-term volatility. 

When the contract expires and the underlying asset’s value is at the strike price, both call options will expire worthlessly. Thus, you gain maximum profits from the sum of the premiums received. 

However, if the asset's value makes a strong upward or downward move crossing the breakeven points, the loss potential is unlimited.   

The iron condor is a combination of a bull call spread and a bear call spread. You can use this strategy when you anticipate a rapid retreat in market volatility, making stocks trade at a narrow range. 

Here, both the upside and downside risks are minimal, thus limiting the profit potential. In order to implement this strategy, you need to do the following:

  • Purchase an OTM put which has a strike price below the underlying security’s current price. 
  • Sell an OTM/ATM put with a strike price closer to the underlying’s current market value. 
  • Sell an ATM/OTM call whose strike price is above the underlying’s current price. 
  • Purchase an OTM call option which is way higher than the underlying security’s current market price.

You can gain the maximum profit from this strategy when the underlying asset’s price settles between the two short strikes upon expiry, causing all options to expire worthlessly. However, you can incur a maximum loss if the underlying moves above the long call strike price upon expiry. 


You now have a clear idea of which strategies to implement during times of market volatility. However, knowing these tactics is not enough. To ensure that you can capitalise on such opportunities and at the same time keep tabs on the stock market, you need a platform which allows you to do both under one roof. 

In comes the New-Gen Samco app. It offers several benefits like 4X equity delivery leverage on 500+ stocks, zero balance margin trading, an advanced watchlist of market movers and more. 

Additionally, you get access to more than 50 indicators and 16 charting layouts to find your best entry and exit positions. 

Download the Samco app today and take your trading game to the next level!   


  • What are the best ways to trade during a volatile market?

Ans. During times of volatility, experts advise using stop-loss orders and never trying to time the market. Furthermore, you should assess your risk appetite and create an emergency fund in case of sudden market crashes.   

  • What are the best tools for measuring market volatility?

Ans. The best tools for measuring market volatility are moving averages, Bollinger Bands, candlestick charts, line charts, Stochastic oscillators, etc. 

  • Are volatility and risk the same?

Ans. Volatility indicates the rate at which a stock’s price changes within a given time period. Whereas, risk entails the chances of incurring losses. However, in situations where high price movements can increase the chances of loss, volatility can be equal to risk.  

Disclaimer: INVESTMENT IN SECURITIES MARKET ARE SUBJECT TO MARKET RISKS, READ ALL THE RELATED DOCUMENTS CAREFULLY BEFORE INVESTING. The asset classes and securities quoted in the film are exemplary and are not recommendatory. SAMCO Securities Limited (Formerly known as Samruddhi Stock Brokers Limited): BSE: 935 | NSE: 12135 | MSEI- 31600 | SEBI Reg. No.: INZ000002535 | AMFI Reg. No. 120121 | Depository Participant: CDSL: IN-DP-CDSL-443-2008 CIN No.: U67120MH2004PLC146183 | SAMCO Commodities Limited (Formerly known as Samruddhi Tradecom India Limited) | MCX- 55190 | SEBI Reg. No.: INZ000013932 Registered Address: Samco Securities Limited, 1004 - A, 10th Floor, Naman Midtown - A Wing, Senapati Bapat Marg, Prabhadevi, Mumbai - 400 013, Maharashtra, India. For any complaints Email - grievances@samco.in Research Analysts -SEBI Reg.No.-INHO0O0005847

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