Thread by @kirubaakaran

I always used to develop option selling strategy with fixed stop loss, when SL 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

But this adjustment was mostly on a 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 position

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, 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 happens.

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.

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 be much better for those who want to trade with lower risk.

After testing without with our own capital,we are able to see promising returns with this strategy, will be launching this as a bot soon with our squareoffbots.com platform that will be fully automated. Here's the link to the blog post squareoff.in/intraday-optio…