Short Straddle Intraday Strategy

  • Nov-10-2020

We know that market trends only 30% of the time and remaining 70% of the time it stays in range bound, which immensely helps the option sellers because the more market stays in range bound, higher the decay of premiums.


The above chart is the daily return distribution of Index, we could see more number of times Nifty and Bank NIFTY moved between -0.30% to 0.30% on daily basis, only lesser number of days it has moved wildly on either side, if we follow ATM short straddle strategy, with a fixed stop loss, then we can control our risk when market moves wild and also we can continue to make profits when market stays in range bound.

We used stockmock platform to test this ATM Short straddle strategy

Bank Nifty:

We short one lot of ATM options at 9:20 am every day with 25% stop loss on each leg,we will choose weekly expiry not monthly expiry as the decay is more with weekly options.

For example, if we short ATM CE options at Rs.100, then our stop loss is 125, when that is reached we exit ce, if not we exit by EOD only. Please note that we exit only the strike that hits the stop loss, not both legs. Here’s the gross result

When tested with one lot, the returns are really good.

It has ended up in profits almost every month



Nifty:

We tested the same with Nifty as well with same rules. We short one lot of ATM options at 9:20 am every day with 25% stop loss on each leg, For example, if we short ATM CE options at Rs.100, then our stop loss is 125, when that is reached we exit ce, if not we exit by EOD only. Please note that we exit only the strike that hits the stop loss, not both legs. Here’s the gross result

Returns are really good with Nifty options as well

On monthly basis returns are consistent as well


At Squareoff.in we introduced bots for the above strategy with Nifty and Bank Nifty . Users just have to login to https://squareoffbots.com/aliceblue/login bots page every day and update their lot size, our bot will automatically place entry and respective stop loss for you. The important element in trading short straddles are, you need to short both call and put options at the same time, with our automated bot, this is made easy now, and with stop loss already into the system, we don’t need to worry about any adverse movements in markets as we are completely protected against down side risk. If you liked this article, please do share share it (WhatsappTwitter) with other Traders/Investors. 


  • profile
    Minerva Designs
      3 days ago

    Have you considered slippage? Because on doing backtest of same strategy with even 1% slippage gives a whole different picture!

    Reply 0 comments
  • profile
    Sai Mohan Reddy
      1 week ago

    Earlier it was 50% sl in each leg for banknifty. Why did you tweak it to 25% in just matter of month or two. Past two months might have been favourable for 25% and you might have gotten good results. But if we tweak it ver often, will we be profitable over long run ?

    Reply 1 comments
    • profile
        1 week ago

      Excellent

  • profile
    dhaneesh dharmajan
      2 weeks ago

    What abt slippages kiru, why an exp trader like you are missing such relevant points. Considering Anything less than 1-2% is suicidal.

    Reply 0 comments
  • profile
    Sunil panda
      2 weeks ago

    Seems to be good strategy, should be limited to one stop loss hit.

    Reply 0 comments
  • profile
    Sujal Ajmera
      3 weeks ago

    If one leg SL is hit, shd 2nd leg SL be moved to cost?

    Reply 1 comments
    • profile
        3 weeks ago

      no, one should keep second leg as it is with same stoploss, and exit only at given time (which is 03-10 PM approx, i guess)


  • Tags | option trading startegy,Short Straddle Intradayu00a0Strategy,Intradayu00a0Strategy,short straddle option strategy,intraday option selling strategy,short straddle strategy,bank nifty option selling strategy,nifty option selling strategy