The Time–Target Trade-off in Expiry-Day Call Option Buying: Evidence from a Rule-Based Intraday Strategy in the Indian Index Derivatives Market

This study examines the time–target trade-off associated with rule-based intraday Call-option buying on index expiry days in the Indian derivatives market. The study evaluates whether accepting relatively smaller profit targets with shorter holding periods can improve the effectiveness and consistency of expiry-day option trading compared with waiting for substantially higher returns. An empirical analysis is conducted using 24 recorded expiry-day observations, with Call options purchased at approximately 2:00 PM and subsequently exited during the afternoon trading session. The analysis considers realised percentage returns, holding duration, and India VIX as the principal market-volatility indicator. The results show that 14 of the 24 trades generated positive returns, while 9 produced negative returns and 1 produced approximately zero return. The median realised return was approximately 3.73%, with returns ranging from −95.19% to +77.16%, highlighting substantial dispersion and downside risk. The average holding period was approximately 25 minutes, with a median of about 22 minutes. Importantly, the correlation between realised return and holding period was approximately −0.55, suggesting that longer exposure did not systematically generate higher returns. The correlation between India VIX and realised return was approximately −0.31, indicating that higher volatility alone did not ensure superior Call-option performance. Overall, the findings provide preliminary evidence that shorter holding periods and more moderate profit targets may offer a more practical framework for expiry-day Call-option strategies, although the small sample limits generalisability. The study contributes to the literature by highlighting the importance of the interaction between time to expiry, profit objectives, holding duration, and market conditions in short-horizon option trading.

Expiry-day options; Intraday trading; Option trading strategy; Indian derivatives market.

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