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Intraday Option Trading strategy with auto adjustments
  • May 17, 2021
  • admin
  • 95

I always used to develop option selling strategy with fixed stop loss usually when it hits, I prefer to simply close it and move on. Since most option experts use to tell me that only with adjustments one can make consistent profits with option selling, but this adjustment was mostly on discretionary basis. I couldn’t come up with any quantifiable parameters for adjusting the option legs based on any specific rules.

Three months before I got an idea for creating an Option selling strategy that can automatically adjust positions based on market movements. Here’s the rule.

Consider Bank Nifty is trading at 30000, we sell ATM straddles at 9:30 AM, but we don’t keep any stop loss here. Instead, when Bank Nifty moves +1% or -1%, we exit the straddle and create a new position. So when Bank Nifty moves to 30300 or 29700, the straddle created at 9:30 am will be closed, and new straddle will be created with same +1% or -1% move in Bank Nifty, if that happens again, then we repeat the same, exit the straddle and create new one. I simply forward tested with 2 lacs capital with one lot. From Feb 2021 to till date this strategy has been fully automated and running live.

Here’s the snapshot of trade results including all real charges like brokerage, Trans charges, GST, STT etc.

The drawdown did not exceed more than 10% so far

Even the returns generated were butter smooth without any violent moves, made around 70,000 profits after all charges and slippages which is around 36% returns for last three months.

Whenever market moves up, it moves up like a snail and when it drops it falls like a stone. So with this strategy, when markets trend, it doesn’t trend continuously non-stop. It moves, then it pauses, and then it moves, during this time when market pauses, the decay in premium happens. And also we are using 1% as benchmark for adjustments, instead of using points like 100 or 200, because Bank Nifty easily makes such 100 points move, which will end up in more number of trades that in turn results in higher transaction charges. By keeping 1%, we are giving enough room for Bank Nifty, as long as it oscillates between -1% to +1% the position makes profit.

Here’s the distribution of profits on day wise, since decay on friday’s aren’t much, profit made on Fridays are comparatively lesser. Wednesdays are the one that makes higher profits.

For people who are interested in the back test, check this out. It has generated around 14000+ gross profits from 2016 to 2021.

The average profit per trade is much higher on Thursday and much lower on fridays, hence we recommend users to avoid using this bot on fridays.

The maximum profit from this auto adjustment strategy came from expiry days.

Higher volatility is not a problem for this strategy, because the highest profits generated from this strategy came during last year, the second highest was from this year.

The maximum drawdown from this auto adjustment strategy is -1400 points exlcuding fridays.

If you want to trade this strategy only on expiry days, then this is how your overall gross profit would look like

and max drawdown was 900 points if you traded only on expiry days.

Further Analysis:

Upon further analysis, we figured out that maximum profits from this strategy comes from 1st trade, once the market gets into trending phase, the follow through trades ends up in loss most of the time. By sticking to only one trade from this strategy, the average profit per trade increases. So the bot has been modified to trigger only one trade, once the 1% level is crossed, the bot would close the trade and avoid placing any new trades.

And those who are looking to trade multiple uncorrelated strategy, combining Intraday Bank Nifty Short straddle strategy with this auto adjustment strategy would yield best returns because, with the fixed stop loss strategy, at times after hitting stop loss, market moves in favour and decay happens, but we miss out the profits, but with this bot, these are the scenarios we make profit since we can capture the theta decay. Also, if the market keeps moving in one-sided direction, the fixed stop loss strategy would close the loss making position very quickly and the other side of the leg continues to decay much higher which ends up in profits, whereas the auto adjustment strategy might end up in loss that day as it continues to create new straddle with every 1% move, but by capping only one trade from this bot, we are capping the risk to greater extent.

Even though I considered 2 lacs capital to trade one lot, we should be even more conservative with the risk, I would suggest to trade with 3 lacs capital per lot or even 4 lacs capital per lot would much better for those who want to trade with lower risk, since drawdown will be much lesser with higher capital. We are able to see promising returns with this strategy after testing without our own capital.

The bot has been launched now with both Nifty and Bank Nifty, all users has to do is enter your lot size to the bot every day, the system will automatically place the entry at 9:30am and start making auto adjustments whenever Nifty/Bank Nifty moves 1% or -1% from 9:30 am levels.

Based on numerous requests from our subscribers, we are enabling free access to Multi Short Straddle bot free for users who have opened Alice blue account under Square off Referral. If you have opened an account under our referral and interested to get access to this bot, please email with your Aliceblue id, we shall enable free access for you to this bot, as its a limited slot offer, once the slots are filled, free access cant be granted further.

And others who wanted to get free access to this bot can open account using this link and get access to it.

If you liked this article, please do share it (WhatsappTwitter) with other Traders/Investors.

95 comments on “Intraday Option Trading strategy with auto adjustments

  1. so after every one percent move we close the stradlle without keeping any stop loss?? wht if market drops 1 percent and keep on dropping then how we will exit

      1. Hi
        If I already have Alice blue account then how to use this strategy ?
        How is it’s performance on equity options ?

  2. I love insights provided in squareoff blogs.
    I always look forward to the new blogs/insights on this website. As a beginner, it has helped me broaden my thinking horizon with respect to stock markets. Thanks Mr. Kirubakaran Rajendran.

  3. Say,banknifty rose to 33000 from 30000.
    Now we exit 30000 and made fresh entry I.e sold 33000ce and pe both.Right?
    And these will be going on upto 2 pm or 3pm ?

  4. Superb analytics. Closely watching am your post and learning. Waiting for sufficient funds to subscribe your bots

      1. Is there any intraday profit target for the strategy or the straddle is to be closed only at EOD no matter what happens? What about during expiries

  5. combining Intraday Short straddle strategy with this auto adjustment strategy makes sense. However, I am still apprehensive about the 25% SL on the Intra-day strategy.

    Have you tried back-testing it with varied SLs ranging from 15% to 50% potentially? Thanks

  6. This straddle atm strike calculated by bank nifty spot price or future price sir? Please clarify sir

  7. There are 5 entries on 25-02-2021. According to the strategy, it should be 4, right? where does the extra entry come from?

  8. What is the Name of this strategy bot?
    I am a yearly subscriber to your all bots.
    Kindly specify the name or aerial no.
    So we can try it.

  9. sometimes drastic move happen in bknft, ex.if u make straddle at 30,000 and now trade at 30280,you would be close this when 30300 comes, but moves above 30400 within a minute then how your bot work ?

    1. The bot checks the bank nifty spot price at 9.30 am, and shorts ATM options of both ce and pe, from there when BNF moves +1% or -1%, it exits the old strikes and initiates new strikes, in order to handle such spikes, the bot by default places a dummy stop loss, when the 1% level crosses, these dummy sl gets cancelled and new orders are placed, in times of such violent spikes, these sl can help us to get out quickly and the new order gets palced by the bot

  10. This looks like a good strategy but why the profits are so low for 2018, 2019 . That’s concerning.

  11. Does BOT immediately places new orders once 1% movement is done or it waits for sometime may be a minute for the price to sustain at those levels and then place orders

    1. Our bot works with four brokers AliceBlue, Fyers, Angel Broking and Trustline. To take free trial use this link

      We provide a 7 days free trial, followed by a yearly charge of Rs.17700 to access any one of the trading bots mentioned here, but we provide access to all 15 different trading strategy bots at a discounted rate of Rs.29500 per year. However, we provide three trading bots at free of cost for all users who open Broking account under our referral using this link

      Please refer this video step-by-step instruction on how to use SQUAREOFF TRADING BOTS

      If you want to automate your own strategy, then you can use our platform which works with Zerodha. Please refer this link for more info

  12. As per latest update, are you closing this straddle after 1% index movement, That mean you are giving option to user like GRB for reentry. or without any option closing this trade after 1% BN Movement…

  13. As mentioned recently, did u update Bot; exit for this trade, if BN moved +/-1% without any reentry. Please confirm

  14. Sir, As per further analysis provided at the end.. This strategy is modified to exit all positions if 1% move happens in BN and no further trades for that day. is it right?

    1. Say, first you initiate straddle at 9.30am. BNF moves +1% at 11am. Then old positions will get exited and new straddle trades will be initiated at 11am. BNF moves again +1% at 1pm. Now, you will exit all positions and no more trades for rest of the day. Is my understanding correct? So basically, only one adjustment is done for first 1% movement.
      Now, my second question, what if BNF moves -1% (after 11am trigger) at 1pm. Will it initiate second adjustment?

      1. The 1% Straddle bot will place atm short straddle orders at 9:30 am, if bank nifty moves +1% or -1% from 9:30 am levels then it exit the position.

        As long as bank nifty trades between this range; this strategy will end up in profits

        1. Oh, title of above topic is misleading due to word “auto adjustments”. Thanks for prompt clarification! Then actually, it is much similar to 9.20 straddle with 1% index movement as stop loss for both the legs.

  15. In free bot Auto adjustment banknifty straddle strategy will system trade once per day or create multiple straddles after every 1% move in banknifty.

  16. What about those not using Aliceblue and not wanting to open a fresh account since already on zerodha . How do we get access ?

  17. So as mentioned in the later part of the article, you dont take trade after the first 1% move has happened?
    So do you do adjustment after 1 % move? Or is it only one straddle trade per day?!

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