Short Straddle Intraday Strategy

  • Aug-24-2020

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 50% 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 150, 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 50% stop loss on each leg, For example, if we short ATM CE options at Rs.100, then our stop loss is 150, 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 are going to introduce bots for the above strategy with Nifty and Bank Nifty soon. 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
    Jerin PT
      2 weeks ago

    Sir what will be impact with this strategy if gap up / down. How should we adjust?

    Reply 2 comments
    • profile
        2 weeks ago

      Hi, it is an intraday strategy no worries about gap up/down....

    • profile
        2 weeks ago

      Yes we can

  • profile
    Gopal Kanani
      3 weeks ago

    Wrong results in stockmock. for this same strategy see result of trade date 28th August. In actual there is apx. 1600 Rs. loss for nifty. but in backtest result, it is in profit of 228 Rs. 50% SL hit in actual but in backtest no sl hit. same for 27th August trade. checked 2 days results with actual trade both in actual loss but in result it is in profit. DO NOT TRUST STOCKMOCK RESULTS. HUNDREDS OF MISTAKES. looking for alternative of stockmock. please suggest alternative which shows real numbers.

    Reply 6 comments
    • profile
        3 weeks ago

      Check Quantsapp

    • profile
        3 weeks ago

      hi , this is gaurav , can you share your mobile no via email(bluto98@gmail.com ), i have some queries related to stockmock .

    • profile
        3 weeks ago

      in banknifty data it is showing one leg loss.

    • profile
        3 weeks ago

      Good observation

    • profile
        3 weeks ago

      Yes

    • profile
      Gopal Kanani
        3 weeks ago

      27 August was not actually loss trade but in stockmock result it shows more profits than actual. actually sl hit in one leg of nifty but in results no sl hit.

  • profile
    Harsha varthan
      3 weeks ago

    Thank you fir sharing this. Have couple of question 1. Calculation on nifty daily movement, it is calculated for how many years? 2. Let’s say if Nifty opens at 11560, need to write 11500 pe and 11600 ce right? Wanted to understand precisely, thank you

    Reply 0 comments
  • profile
    ajan selvam
      3 weeks ago

    The ATM strike is selected at 9 20 or based market open?

    Reply 1 comments
    • profile
      Square Off
        3 weeks ago

      Based on 9:20 am levels.

  • profile
    Madhan kumar
      4 weeks ago

    Is it daily basis or weekly expiry day trade? If one side SL triggers, what about another side. When we need to close. Immediately or close by EOD?

    Reply 1 comments
    • profile
      Square Off
        4 weeks ago

      Its daily basis, if one hits sl, close that trade alone, other strike we leave it open and close by eod, or when sl hits

  • profile
    Mahesh S
      4 weeks ago

    It is good Strategy. Daywise data is available can i get this data

    Reply 0 comments
  • profile
    Manish Bheda
      4 weeks ago

    stoploss hit any of the oneside Example if CE side hit the stop-loss PE side when we should squareoff

    Reply 1 comments
    • profile
      Square Off
        4 weeks ago

      PE side when we should squareoff/// when it hits stop loss or by eod


  • Tags | option trading startegy