We have already launched Bank Nifty short straddle bot and its been running successfully since last six months. With Short straddle, we are shorting ATM options, but with Short strangle we will short 200 points away OTM options with 25% stop loss parameter, no targets.
We short one lot of ATM+200 points, ATM-200 points options strike at 9:30 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 hit 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 from 2017 to 2021 till date.
It has ended up in profits almost every month
The drawdown with short strangle is comparatively minimal than short straddle, since premium is lesser with OTM options. Traders who are already trading Short straddle are already making profits, by trading strangle along with it, their option strikes are diversified with ATM and OTM options, which helps in additional premium decays hence more profits. Recommended capital to trade one lot is 2 Lacs.