Making losses on 9.20 short straddle? Backtest suggests adjustments to improve strategy (2024)

FAQs

Making losses on 9.20 short straddle? Backtest suggests adjustments to improve strategy? ›

To enhance profitability, Zelawat suggests a few potential solutions for the 9.20 Bank Nifty short options straddle strategy: (a) adjusting stop-loss levels to a narrower band, or (b) entering the trade earlier than 9.20 am, or (c) halting trading and implementing paper trading to study behaviour.

The 9:20 AM short straddle strategy offers traders a dynamic approach to capturing potential profit from market volatility in the early trading hours. By selling both a call and a put option with the same strike price and expiration date, traders position themselves to profit regardless of the market's direction.

Short straddles can be adjusted to extend the time horizon of the trade or by rolling one of the spreads up or down as the price of the underlying stock moves. If one side of the straddle is deep-in-the-money as the position approaches expiration, an investor has two choices to maximize the probability of success.

The 9:20 AM Short Straddle strategy gained prominence for its ability to capitalize on the intraday market volatility witnessed between 09:20 a.m. to 3:15 p.m. By selling both a call and a put option (Weekly Option) with the ATM strike price and the same expiration date, traders aimed to profit from market movements, ...

Usually people recommend a stop loss of 30% when trading the intraday bank nifty short straddle. But I did some backtesting (for the past 5 years) on stockmock with a 30% SL and a 20% SL and found that 20% SL gives a much better return though the win % days is slightly less.

As long as the market does not move up or down in price, the short straddle trader is perfectly fine. The optimum profitable scenario involves the erosion of both the time value and the intrinsic value of the put and call options.

The potential loss can be unlimited, so it is typically a strategy for more advanced traders.

Traditional Short straddle is a market neutral stratergy (delta approx 0 ) meaning that we gain money if the stock moves sideways , i.e. does not go too much up or down . It has more than 50% chance theortically , since points closer to the current spot position have higher chances compared to the farther points .

Unlimited Losses: The most significant drawback of the short straddle strategy is the unlimited loss potential. If the underlying asset experiences a substantial price move in either direction, you could incur significant losses. These losses are not capped, and they can even exceed the total premiums collected.

1. Bull Call Spread. A bull call spread strategy is driven by a bullish outlook. It involves purchasing a call option with a lower strike price while concurrently selling one with a higher strike price, positioning you to profit from an anticipated gradual increase in the stock's value.

What is the 80% rule in day trading? ›

Definition of '80% Rule'

The 80% Rule is a Market Profile concept and strategy. If the market opens (or moves outside of the value area ) and then moves back into the value area for two consecutive 30-min-bars, then the 80% rule states that there is a high probability of completely filling the value area.

The fifty percent principle is a rule of thumb that anticipates the size of a technical correction. The fifty percent principle states that when a stock or other asset begins to fall after a period of rapid gains, it will lose at least 50% of its most recent gains before the price begins advancing again.

It is a high-stakes game where many are lured by the promise of quick riches but ultimately face harsh realities. One of the harsh realities of trading is the “Rule of 90,” which suggests that 90% of new traders lose 90% of their starting capital within 90 days of their first trade.

To enhance profitability, Zelawat suggests a few potential solutions for the 9.20 Bank Nifty short options straddle strategy: (a) adjusting stop-loss levels to a narrower band, or (b) entering the trade earlier than 9.20 am, or (c) halting trading and implementing paper trading to study behaviour.

A short – or sold – straddle is the strategy of choice when the forecast is for neutral, or range-bound, price action. Straddles are often sold between earnings reports and other publicized announcements that have the potential to cause sharp stock price fluctuations.

As noted above, a butterfly spread combines both a bull and a bear spread. This is a neutral strategy that uses four options contracts with the same expiration but three different strike prices: A higher strike price. An at-the-money strike price. A lower strike price.

537 3 mins. 03 November 2023. A short straddle is a non-directional options trading strategy that involves simultaneously selling a put and a call of the same underlying security, strike price, and expiration date.

A long – or purchased – straddle is the strategy of choice when the forecast is for a big stock price change but the direction of the change is uncertain. Straddles are often purchased before earnings reports, before new product introductions and before FDA announcements.

Divide the total premium cost by the strike price to determine how much an underlying security must rise or fall to earn a profit on a straddle. It would be calculated as $10 divided by $100 or 10% if the total premium cost was $10 and the strike price was $100.

A short straddle is a combination of writing uncovered calls (bearish) and writing uncovered puts (bullish), both with the same strike price and expiration. Together, they produce a position that predicts a narrow trading range for the underlying stock.