--- title: "How does hedging before elections, the Budget or an RBI" description: "A hedge bought before an election, the Budget or a policy decision pays for the volatility the options market already prices for that event." source_url: "https://www.rupeecase.com/learn/questions/hedge-before-elections-budget" --- India VIX rose on Budget Day and eased on the next session, once the event had passed Daily close of India VIX from 20 Jan 2026 to 13 Feb 2026, with Budget Day, 1 Feb 2026, marked. Annual percentage points, from the NSE index close file. Source: NSE end of day data, computed by RupeeCase. As of 13 Feb 2026. Event days carry a price. Options that run through a Budget, an election or a policy meeting are priced with extra volatility around the event, and the increase shows in India VIX on the day. The Budget was presented on Sunday 1 Feb 2026, and NSE ran a special session that day: the index fell and India VIX rose on the day. On Monday 2 Feb the index rose and VIX eased back. Hedging into an event means buying protection at a price that already includes the event. Two costs come with that. The first is the premium, which carries the extra volatility. The second is decay: the option loses time value every day, so a hedge bought well before the event pays for days when nothing is expected to happen. The alternative is to size the cover to the portfolio rather than to the event. The hedge calculator takes the portfolio value and the beta, and shows the futures lots and the cost of a put floor. A futures hedge costs less in premium but gives up the upside, and a put keeps the upside but costs more. Compare the cost with the loss it covers. A hedge that costs a month of premium is a fixed cost whether or not the event moves the index. Past moves around events are a guide to size, not to direction, and the record does not show events moving the index the same way each time. The cover is a decision about risk, not a call on the outcome: its size, the protection wanted and the cost for the period. **Before you trade.** Derivatives trading carries a high risk of loss. SEBI's study "Profitability of Individual Traders in the Equity Derivatives Segment (FY25 to FY26)" (August 2026) found that 87.7% of individual traders in equity F&O made net losses in FY26, with aggregate net losses of Rs 91,685 crore. [Read the SEBI study](https://www.sebi.gov.in/reports-and-statistics/research/aug-2026/study-profitability-of-individual-traders-in-the-equity-derivatives-segment-fy25-fy26-_103835.html) How does hedging before elections, the Budget or an RBI policy work?A hedge bought before an election, the Budget or a policy decision pays for the volatility the options market already prices for that event, and that premium usually falls back once the event passes. The hedge pays off in the outcome where the index falls sharply, and it costs premium in every other outcome, so the decision is cover against cost. LGo deeper ## Where Learn teaches this. [Go deeperHedging a stock portfolio with Nifty puts9 min, Intermediate](/learn/path-17/module-17-13-hedging-with-nifty-puts)[Go deeperCollars and put spreads as cheaper hedges9 min, Intermediate](/learn/path-17/module-17-14-collars-and-put-spreads)[Try itHedge calculatorFutures and put lots for a sample portfolio, and what the cover costs.](/learn/tools/hedge-calculator) SSources ## Go to the source. 3 sources, NISM the most cited The publisher of each source listed below. Source: Module undefined source list. 1. [NSE, India VIX: what it measures and how it is computed](https://www.nseindia.com/static/products-services/indices-indiavix-index) NSE 2. [SEBI, understanding derivatives (investor education)](https://investor.sebi.gov.in/understanding_derivatives.html) SEBI 3. [NISM, Series VIII equity derivatives certification test objectives](https://www.nism.ac.in/revamp-nism/test-objectives-revised-nism-series-viii-equity-derivatives-certification-examination/) NISM ?Questions people ask ## Related questions. 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