🧵 #AlgoTestExplains (#2) : How do you trade the short straddle?

In this week's edition of our new series, we're going to be talking about how the short straddle can be deployed to make money WITH and WITHOUT delta hedging 📈

1/15 Firstly, the intraday theta when selling options can be thought of as your compensation for the asymmetric risk that you’re taking on when selling a straddle.

The buyer is paying you this amount for the day.

2/15

Curve fitting is one of the most prominent perils for uninformed sytematic traders.

Here's 5 key points from @pawannthakur, @yashrj25, @vihan13singh & @tony_gazillioni on how you could declutter the mirage of double digit sharpe ratios & beautiful equity curves 🧵

1/12 #1 Equity curves:

The data that we use to backtest is fixed.

If you keep tuning your inputs to this, you will probably arrive at an apparently beautiful equity curve.

However, when you trade such a strategy, sooner or later you’re bound to fall on your face.

2/12

🧵 #AlgoTestExplains : How Does a Long Straddle Make Money?

Here's a new series wherein we dissect trading strategies, concepts & more via threads 📈

For our pilot thread, we will discuss how one can profit off of intraday long straddles.

1/13 A long straddle comprises buying a put (PE) & call (CE) of the same underlying, strike and expiry.

The price you pay to trade a long straddle intraday is the net theta for that day.

Let's take a look at the greeks of such a position.

2/13

We all know @itjegan sir is a seasoned, experienced & consistently profitable trader.

He's done it both on the discretionary side as well as now as a systematic algo trader.

Here's 6 golden lessons from the man who manages 100 Cr 🧵

1/12 Psychology:

Contrary to popular belief, system trading does often toy with our emotions.

As Jegan sir says, your MTM swings throughout the day will rarely be linear.

In order to minimise the emotions, you must backtest your strategies thoroughly & in a robust manner.

2/12

#StratGuideByAlgoTest

We're back with another strategy guide/idea! 🤩

This time, we've considered an option buying strategy with a lower margin requirement.

Watch the video on our YT channel for a step-by-step walkthrough! 🤝🤝



1/5 Index : BN
Underlying: Cash
Square off: Partial

Entry time: 09:18
Exit time: 15:15

2/5