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, which chooses ATM strikes based on spot price.
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 excellent.
It has ended up in profits almost every month
Nifty:
We tested the same with Nifty as well with the 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 perfect 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 log in to https://squareoffbots.com bots page every day and update their lot size, our bot will automatically choose the right strike price based on Spot price of Bank Nifty/Nifty, 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 8 months (as on June 2021), however there are few months which were tough, due to market volatility back to back stop loss was hit and the strategy was in drawdown phase, but eventually it recovered from drawdown and made new equity high. That’s why we always say be disciplined and stick to the trading bot for a 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 the 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. The live profits of Short straddle bot can be checked here http://performance.squareoffbots.com/
Please note that our bots works only with Aliceblue, Angel Broking, Fyers and Trustline. Also we provide three trading bots at free of cost for all users who open new broking account under Squareoff referral using this link http://squareoffbots.com/ If you have existing account with any of these four brokers, you can take one-week free trial.
- https://squareoff.in/bank-
nifty-intraday-option-buying- GRB option buying botbot/ - https://squareoff.in/orb-bank-
nifty-only-monday-trading- Bank Nifty Options orb Monday botstrategy/ - https://squareoff.in/orb-2-pm-
intraday-bank-nifty-strategy/ Orb bank nifty 2pm futures bot
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Hello Sir, Good strategy. Can you implement this in tradetron for me? I can pay you one time charges.
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.
Same can be applied in Quantply also.
then go and apply. Kiru sir should patent this strategy..
Do you have tradetron account?
No, we don’t. We use our own execution platform.
Can you show results with 2% slippage?
we used stockmock platform for backtest, you can use the same and apply necessary slippages and calculate the returns.
Hi , At what time exactly bot places the order ? between 9.20 AM to 9.21 AM or some other time?
Its at 9.20 am, so input to bot should be given before 9.20 am.
Today order got executed while was inputting in squareoff website by 9:19:30 itself
yes bot starts firing order once market opens, that’y we recommend users to enter input before 9am
Hello Kiru, Will nifty straddle have lower slippage than banknifty straddle? Is slippage broker dependent ?
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.
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????
Hi, Its one lot. One call option and One lot put option
Huge loss today. Lost more than 15% today in this strategy.. yesterday lost 5%.. 20% in 20 days.. what is the max drawdown?
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.
Should we trade this strategy on budget day given it has very high failure rate? 3/4 based on stockmock results show max failure
You can avoid trading it on budget day, as in last 4 years budget session it has ended up in loss due to extreme volatality.
Can we trade this strategy for budget day since your hißtorical back test is showing consistent loss?
You can avoid trading it on budget day, as in last 4 years budget session it has ended up in loss due to extreme volatality.
sir can you come up with monthly subscription instead of collecting lumpsum amount upfront
As of now, we do not have monthly plans, once we introduce it, we shall let you know
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.
Sure, we shall let you know when we have monthly subscriptions.
Hi kiruba can I put point sl instead of % sl ? So tat my max sl will be same throughout wat do u suggest?
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
Are you avoid trading it in any other days other than budget to decrease the lossing days ?
Not really, only users who are risk averse avoid trading big event days, others continue to trade every day.
Other than budget day do we have to avoid trading in any other days which can decrease the loss trades ?
Not really, only users who are risk averse avoid trading big event days, others continue to trade every day.
what if MDD is exceeded, suppose let say MDD exceeds more than 1.5 times or 2 times the MDD shown by stockmock backtest? what should one do at this time?
(given for one lot trade the trader keeps 2.5L for banknifty short straddle)
Max drawdown is always in the future, there is a very high probablity that it will exit your historical drawdown in the future, so need to be prepared for that
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.
You need to squareoff by 3pm. Bots do not auto squareoff
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
Hi, we keep 25% Stop Loss for all our option bots
Sir when premiums are low 25% sL not working can you suggest me best sL for low premiums
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.
with today bnf intraday straddle has reached 2x max historical drawdown. can we assume the system is broken and stop trading ?
No, system can stay underwater for prolonged time when market volatility changes. Once volt subsides, it would be back on track
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
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?
1lac
Sir this strategy is now >3x backtest drawdown.. any point trading..?
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.
I guess Slipages and brokerage charges are not included in the data shown above. The profitability will reduce significantly if we include these expenses.
The strategy backtest results shown are gross results, you can use the stock mock backtets platform and add in your desired percentage to deduct from gross results, which can show the final net profits. We have been running this system live almost for 8 months now, transaction costs is not much since as per system we only trade once in a day, no re-entry, no adjustments, so it doesn’t affect much. You can refer the live performance of this strategy in this link http://performance.squareoffbots.com/
sir now drawdown is 3 times the backtested stockmock drawdown.. lost my full capital (8lacs) by doubling down during drawdown.. please help..
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.
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.
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.
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.
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.
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 !
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.
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.
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
Hi, you can use stockmock.in platform to backtest
Daily PNL Report which you are sharing in Telegram channel is the Daily PNL or Cumulative PNL. PNL is based on how many lots? Thank you!
The Profit/Loss report that we share every day is based on total bot users input for that day alone, its not cummulative, you can refer to the % mentioned next to each bot to calculate the capital deployed for each of the bots.
Any proper exit time of straddle..?
Entry at 9:20. And if 1 leg got sl then second leg when willexit .. any time?
second leg will be exited when SL hits or by 3:20 in the evening
Hi,can one increase the lot size,if fund is available ?
What do you suggest?
Yes, we recommend to trade with minimum 2 lacs per lot
where can this strategy be virtually tested ?
What is subscription charges?
Rs.17700 per year
Sir can we hedge this short straddle and how
Hedging Short staraddle can be done by buying OTM options which will reduce your over all profits to a greater extent
hello sir, can we change the entry and exit time in this strategy??
With https://squareoffbots.com/ its not possible, however with optionx.in you can do it as per your own entry and exit time
Can I put trailing SL for individual leg in your stratergy? Like if premium reduces by X% then move SL by X%. Also can I add hedges to get margin benefit? I am really intersted if I could do in mentioned stratergy.
Yes, it can be done once fully automated version is made available.
As of july this year it has made 75k excluding slippage and charges. Please let us know on what basis did you calculate 80% returns mentioned in the blog?
The returns 80% mentioned since inception, not for this year. Please refer http://performance.squareoffbots.com/ for detailed live reports
I’ve noticed somtimes an extra 1% of SL is hit putting an SLM for both the legs at 25%. Is it a good idea to put a SL at 24% instead of 25 to avoid extra slippage? Or would it affect the performance?
Changing the SL to 24% doesn’t have any impact, since SL-M orders would usually have slippages irrespective of where we keep the SL. On the long run it doesn;t matter, the bot has been running with 25% sl since last one year and made 80% profits, it did not have much impact.
At times I’ve noticed the slippage to be substantial. For example, on 23th August there was a slippage of 6%. Should i consider this as an exception or such major slippages are frequent in this strategy?
It happens when there is suddent extreme movement in markets. We are planning to implement SL-L order with bots and if not filled in 30 seconds, it will be converted to market order order automatically and makes exit.
This change will be done by this week
On 3rd sept as well there was a slippage of 10%. I believe this is happening because of freak trades going in the market. My only concern here is for people like me who are using the strategy manually and cannot watch the market entire time.
I did consider putting a SL-L but as you said there is a challenge of it not getting executed. Do you have a solution for it?
At https://squareoffbots.com/ we have implemented Stop loss limit order functionality which avoid the freak trades completely and also it has timer limit of 30 seconds, if order not filled in 30 seconds, it will be automatically converted into market order without any manual intervention from user side.
In the beginning of the series premiums are very high and so stop loss will be quite deep. Should we still keep 25% stop loss
Yes, the premiums are higher at the start of expiry, since we use 3 lacs per lot, even if both side stop loss hit, we lose only 2% of the capital. So not an issue, if we trade with correct money management rules
I am surprised how this strategy turned into profit on 27th jan when banknifty opened in gap down and close in big positive. Each side of your leg should 25% of SL but you are showing into profit. I am still confuse? The same thing happened on 28th jan. Could you please explain in detail with strike bot chose, what was SL at both side and what was the closing price of each leg.
If I find this strategy relevant and profitable, I might think to subscribe.
You can refer the performance details here https://performance.squareoffbots.com/
Hello sir,
1. Does it work on Zerodha?
2. Can I alter the bot to exit both legs at same time with (combined) fixed SL and target conditions?
Hi,
1. http://squareoffbots.com doesn’t work with Zerodha but https://optionx.in works with Zerodha
2. With Squareoff Bots such customisation is not possible but with optionx you can do it
Hi Kiru sir, great knowledge sharing.. qq to short 9.20 ATM straddle.. its spot price of underline asset at 9.20 rt ?
Yes, spot price