Option Trading Strategy based on Bank Nifty last 30 mins movement

  • Mar-27-2020

Many traders usually buy OTM options near the day end, especially on expiry days, with Hero or zero mentality. Seeing certain volatile movements at times, they think such OTM trades could give exponential returns when market make some significant movement during the last hour. Either they buy Out of the money put options and expect market to crack big time or Out of the money call options and expect market to move up much higher, sometimes people buy both put and call. (Long Strangle)

So we gathered the last 10 years historical data of Bank Nifty and analyzed their last 30 mins Intraday movement, that is between 2:45 PM to 3:15 PM, we wanted to find out how Bank Nifty usually behaves during this period and how it moves specially on expiry day as well. A detailed analysis was carried out.

Three types of data was gathered

  1. Open to Close
  2. Open to High
  3. Open to Low

That is, what’s the actual price movement from 2.45 PM to 3.15 PM.

Then from Open price at 2:45 PM, we check what’s the maximum up move happened.

Then from Open price at 2:45 PM, we check what’s the maximum down move happened.

All these data is gathered and we plotted a normal distribution chart to find where the maximum or frequent movement occurred.

Open to Close:

From the data, we could see that Bank Nifty has moved up +2% at the max and gone down maximum -3% from 2.45 PM, that’s really a very big move in 30 minutes. But how many times such wild occurrences happened? Very less, less than 3% of the time. Most of the time, the movement was flat, where it stayed between -0.3% to +0.3% and as you can see from the below table, 97% of the time Bank Nifty stayed between -1% to +1%, so whoever bought OTM options beyond this level, they are going to lose 97 out of 100 times.

Open to High:

If you think that, no point in waiting till 3:15 pm, there will be some high move that can occur after 2:45 PM, we should make use of that to book profits and get out, fine. Let’s check what’s the maximum up move bank nifty makes most number of time. As you can see, most of the time, the maximum up move was just mere +0.10%, that’s very minimal. And 97% of the time, Bank Nifty has never gone beyond +1% after 2.45 PM.

Open to Low:

Since at times, Market tanks during the last hour of the day, we shall check the probability of that as well. Let’s check what’s the maximum down move bank nifty makes most of the time. As you can see, most of the time, the maximum down move was just mere -0.20%, that’s very minimal. And 97% of the time, Bank Nifty has never gone below -1% after 2.45 PM.

Example:

Today 26–03–2020 Bank Nifty was trading around 19500 at 2.45 PM, statistically the max up move is +2% which is 19700 and max down move from here is -3% which is 18700

19700 CE Strike was trading around Rs.50 today, if someone had shorted it at that time, then he can be 97% sure that it is going to expire worthless and eventually it went to zero.

Conclusion:

It is now statistically proven that, Bank Nifty stays flat most of the time during the last half an hour of intraday session. 97% of the time, all OTM options expire worthless, so chance of making money by buying such OTM options during the last hour is a sure way to lose money consistently. Better get into Option selling with defined risk during the last 30 mins Intraday time frame, which could help you in making consistent returns over the long run.

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  • profile
    manish gohil
      5 days ago

    What about movement in last two hours i.e. from 1.30 to 3.30 pm

    Reply 0 comments
  • profile
    Sahil Gawade
      2 months ago

    I m in a learning phase once I got in that 3 percent winning case... It was my first trade in option though I bought it for 68 rs 1 lot and sold for 150... Brokerage eaten all my money though..I tried it after that Many time I lose all my ruppe.... Just reminded me that

    Reply 1 comments
    • profile
      Sahil Gawade
        2 months ago

      It was of nifty 50

  • profile
    K V Rao
      2 months ago

    Your time selection is not correct. No one trades in last half hour, because of weighted price one can not predict correct price. Besides, there are square off problems. Right time for hero or zero trades is between 12.30 and 2.30

    Reply 0 comments
  • profile
    mihir joshi
      3 months ago

    Is this applicable for only expiry days or the data is considering all the days ?

    Reply 1 comments
    • profile
        3 months ago

      It is for expiry days only

  • profile
    Sanjay Agrawal
      3 months ago

    Sir in the example given the values mentuoned as +2% & -3% of 19500 (price at 2.45 pm) seems to be incorrect. Kindly look into and confirm. Sanjay Agrawal email - sanjaykumaragrawal@gmail.com Thanks

    Reply 0 comments
  • profile
    Rishit Kumbhani
      4 months ago

    In example given 19500 upmove of 2% would be 19900 and not 19700. So Please do correct. I am Rishit and can contact at rishit@labhwealth.com

    Reply 1 comments
    • profile
      Square Off
        4 months ago

      Yes, in the example mentioned, calculation was wrong, you are right

  • profile
    Sanjay Tahilramani
      4 months ago

    The Analysis of time is Very Wrong ..it shudnt be last half an hr or hr...Hero ya Zero Mentality trades are done betn 11 to whatever situations and Circumstances...And last 30 or 60 Min is Not Not OK

    Reply 0 comments
  • profile
    THULASI BABU
      4 months ago

    2% of 19500 is nearly 400 so 19500+400=19900call -3% of 19500 is nearly 600 so 19500-600=18900pe but you said that 19700ce and 18700 pe plz clarify.

    Reply 1 comments
    • profile
      Square Off
        4 months ago

      Yes, you are right, there was a calculation mistake

  • profile
    Guruprasad P
      4 months ago

    Nice Analysis.... If possible anlysis for .1 Hour ,2 Hours, 3 Hours before the expiry. second thing Rollover happens at Monthly once wild movment expected on that day if possible get analysed for last day of monthly expiry in terms of 1 Hr,2 Hr,3 Hr 4 Hr Before the expiry

    Reply 0 comments
  • profile
    Manikandan Dhanabal
      4 months ago

    Fantastic analysis revealed the truth.

    Reply 0 comments
  • profile
    Pichai Vishwanathan
      4 months ago

    Very good analysis... Last half hour trade us mostly not So much profitable as many investors expect it to be

    Reply 0 comments
  • profile
    Sanjay Tiwari
      4 months ago

    Very good analysis, will be helpful for beginners like me.

    Reply 1 comments
    • profile
      Square Off
        4 months ago

      Thank you

  • profile
    Sai Mohan Reddy
      4 months ago

    I saw recently that some people on YouTube are suggesting to go for hero or zero on Wednesday evening or thursday morning. Strategy is to buy OTM calls and puts at same LTP and squaring off positions at 3pm on Thursday. Assumption is that the big moves come on expiry days in one direction. Can you please share if some backtesting done on nifty and banknifty moves on expiry day in single direction.

    Reply 1 comments
    • profile
      Square Off
        4 months ago

      Yes, analysis on that was already done and shared here https://www.squareoff.in/single-post/Bank-Nifty-option-strategyHero-or-Zero


  • Tags | Option Trading Strategy,Bank Nifty option trading strategy,Bank Nifty weekly expiry strategy,Options Intraday trading strategy