Yesterday’s market opened sharply higher after positive news around the India US trade deal.
While long-term investors welcomed the rally, many short-term traders, especially option sellers, were caught off guard and faced heavy losses.
So what really happened?
1. Big news leads to big opening moves
When major economic or global updates come out after market hours, prices adjust instantly at the next opening.
Instead of moving slowly, markets can jump sharply up or down.
Yesterday’s positive trade deal sentiment triggered strong buying interest right from the start of the session.
2. Why option sellers were hit the most
Option selling strategies usually work well when markets stay within a range or move gradually.
But sudden sharp moves can quickly turn these trades into losses because:
• Prices move beyond expected levels
• Volatility rises suddenly
• There’s very little time to adjust positions
In simple terms, the market moved much faster than many traders planned for.
3. How to avoid such surprises going forward
No one can predict every big move, but a few habits can help reduce risk:
• Stay updated on major global and economic news
• Avoid taking oversized positions
• Use clear risk limits or stop losses
• Remember that news can override charts at any time
The key takeaway
Markets don’t move only on technical patterns.
They react strongly to real-world events like policy changes, global agreements, and economic updates.
Understanding this connection can help investors and traders manage risk better.
What do you think?
Do you track global news before trading, or mostly rely on charts and indicators?