Algo Trading in India |
  • November 10, 2020
  • admin
  • 55

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. 

 The Bank Nifty straddle bot has made 80% returns  in last 6 months (as on April 7th 2021), however last two months were rough, due to market volatality back to back stop loss was hit and the strategy was in drawdown phase, but eventually it recoeved from drawdown and made new equity high today. That’s why we always say be disciplined and stick to the trading bot for longer period, users who see streaks of losses would stop trading the bot thinking it stopped working, and users who traded with over leverage would have blown up their capital during drawdown phase. But all bot users who traded with correct leverage(at least 2 lacs per lot) was able to sail through drawdown phase easily. Here’s the live pnl report



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

55 comments on “Short Straddle Intraday Strategy

    1. Hi, unfortunately we don’t have this service. However, very soon we are coming up with a platform where we provide free automated trading platform similar tradetron where you can configure the option strategies for free and trade it automatically without any cost. Will update on this very soon.

    1. Hi Slippage is dependent on size of your funds, a guy trading 2 lots will have lower slippages than the guy trading 20 lots. And it is not broker dependent.

  1. Hi admin!!
    How many lots have been traded in the above calculation?
    Is it 1 or 2? A bit confusing. I mean its written that no. Of lots is 2. Is it 2 lots of each call and put or combined 1 call & 1 put equals 2????

  2. Huge loss today. Lost more than 15% today in this strategy.. yesterday lost 5%.. 20% in 20 days.. what is the max drawdown?

    1. This is what happens if you just trade with margin money, just because broker charge Rs.40,000 or Rs.50,000 per lot, you should not trade with such capital. A person who trades with one lac per lot will face high risk, if the same person trades one lot with 3 lacs, his risk is very less. So the risk is based on the capital you deploy not the strategy. So plan your position size according your risk appetite and trade. Max drawdown is mentioned is this same link.

  3. Should we trade this strategy on budget day given it has very high failure rate? 3/4 based on stockmock results show max failure

  4. I attended your webinar with ALICE BLUE. Your strategies are nice. It would be so nice if you make monthly subscriptions like Tradetron. They will not be able to compete with you. It would really help small investors who can use one or two strategies.
    Hope to get positive response.

    1. Hi, modifications to bot is not possible as it works based on logic already prebuilt, however if you are trading manually, then you can backtest the stop loss points you want to follow and if results are satisfactory, you can proceed further

  5. Hello Sir,
    Can you let us know what’s the exact time for squaring off the positions at End of the day ?? will bot closes, or whether automatically get squared off from the broker.
    Thanks in Advance.

  6. Hi Kiruba, I remember one of your earlier posts mentioning about 50% SL on the premiums. Is there a change in the bots now? Thanks

  7. Hi. Can we apply this strategy for next week expiry in current week. Premium will be higher and so are stop losses. There are chances that we may earn money from both the sides without hitting any stoploss.

  8. with today bnf intraday straddle has reached 2x max historical drawdown. can we assume the system is broken and stop trading ?

  9. sir since 17th feb daily i’m getting loss including today and already lost more than 30% capital in less than 2 weeks. I’m very afraid to trade sir. please advise

    1. Yes, since last week due to high volatility, back to back stop loss is hit. But losing 30% of your capital in a week denotes you are over leveraged, what’s your capital to trade one lot?

    1. Hi, Max drawdown is always in the future, the backtest posted above a year old, since we cannot update the stockmock backtest results every day in the website, so we couldn’t update the metrics, but this is expected, that’s why we always insist to trade with higher capital of atleast 2 lacs per lot, in fact pst sept 2021 margin for one lot will be almost 3 lacs, these capital blow up issue occurs only when we trade with higher leverage, just because broker charge Rs.80000 as margin for one lot, we should not trade ten lots with 8 lacs capital, always reduce your leverage and keep the position sizing dynamic, if you have ten lacs capital we trade 5 lots now, tomorrow if capital is reduced to 8 lacs, then we trad with 4 lots, by reducing the size when capital goes down and increasing the size capital goes up is the right dynamic position size we should follow.

  10. sir now drawdown is 3 times the backtested stockmock drawdown.. lost my full capital (8lacs) by doubling down during drawdown.. please help..

    1. Hi, Max drawdown is always in the future, the backtest posted above a year old, since we cannot update the stockmock backtest results every day in the website, so we couldn’t update the metrics, but this is expected, that’s why we always insist to trade with higher capital of atleast 2 lacs per lot, in fact pst sept 2021 margin for one lot will be almost 3 lacs, these capital blow up issue occurs only when we trade with higher leverage, just because broker charge Rs.80000 as margin for one lot, we should not trade ten lots with 8 lacs capital, always reduce your leverage and keep the position sizing dynamic, if you have ten lacs capital we trade 5 lots now, tomorrow if capital is reduced to 8 lacs, then we trad with 4 lots, by reducing the size when capital goes down and increasing the size capital goes up is the right dynamic position size we should follow.

  11. Sir I am trading this strategy since Nov 18 2020. As on today sitting on 1lac net loss , inbetween saw some profit but system went under water . How long will this period remain. Frustrating since its almost 5months and haven’t made any profit.

    1. Yes, the system has been underwater for a long time due to market’s zig zag movement. It would really test the patience of the trader during such times, we just have to stick to the system, only then we could sail through this drawdown phase.

  12. Hi Kiruba,

    I became paid user towards October 2020 . Started trading BNF straddle from nov first week. Till now I have not even made a penny profit. It been more than 5 months. Backtest results on a period of 5months posts atleast 30-50% returns. How come this strategy is grossly underperforming the historical backtest results. and max drawdown is more than 250% of the historical drawdown.

    In 5 months i have made 0 returns !! Had i invested my money would have made reasonable returns.

    Also some people basis the comments have went bankrupt using this strategy and few are trading on borrowed money. Is it even a good strategy when the performance is so bad and squareoff has listed this strategy as no.1 strategy!!!

    Please advise. I know few fellow friends along with Shankar who trade this strategy on squareoff, all have been suffering. Requesting your kind reply.

    1. Hi
      Always remember max drawdown is the future, any strategy can see rough phase and stay in drawdown for prolonged period of time, only thing that would help us to sail through such rough phase is proper position sizing. The lot size should always be increased or decreased based on ones capital. If your capital is ten lacs and you trade one lot per two lacs, then you must be trading with 5 lots, when your capital increases from 10 lacs to 12 lacs, you increase one more lot, from 5 to 6 lots, similarly if your capital reduces to 8 lacs from 10 lacs, then your lot size should also decrease from 5 to 4 lots. So periods like when strategy is under drawdown, we scale down our lot size which helps us in controlling the risk. Unfortunately, many beginners don’t follow this, they simply trade with higher lot size with limited capital and blow up the account during drawdown phase.

  13. hi , drawdown is increasing on a daily basis.. is it worth to continue trading.. Vishal Mehta said once a strategy reaches 2x its historical drawdown it means its broken.. howcome we are still trading this.. its now >3x historical drawdown.. i guess i might loose my entire capital on this !

    1. Hi,
      Always remember max drawdown is the future, any strategy can see rough phase and stay in drawdown for prolonged period of time, only thing that would help us to sail through such rough phase is proper position sizing. The lot size should always be increased or decreased based on ones capital. If your capital is ten lacs and you trade one lot per two lacs, then you must be trading with 5 lots, when your capital increases from 10 lacs to 12 lacs, you increase one more lot, from 5 to 6 lots, similarly if your capital reduces to 8 lacs from 10 lacs, then your lot size should also decrease from 5 to 4 lots. So periods like when strategy is under drawdown, we scale down our lot size which helps us in controlling the risk. Unfortunately, many beginners don’t follow this, they simply trade with higher lot size with limited capital and blow up the account during drawdown phase.

  14. This strategy will make money in rangebound market provided both SLs are not hit which as per your double top video is less than 10% . Then why it says 70% of the time it is suitable for this strategy. This strategy is a slightly modified version of trend following. If there is any intraday reversal both SLs will be hit.

  15. Sir, is it possible to backtest below adjustment strategy…
    Initiate weekly positional iron fly in nifty on Thursday afternoon for next expiry and keep adjusting with every 100 point and exit on Thursday at 12.30

Leave a Reply

Your email address will not be published.