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Short Straddle Strategy

Market stays 70% of the time in range bound and it trends only 30% of the time. It actually helps the option sellers because the more
market stays in range bound, higher the decay of premiums.

Bank Nifty has stayed between -1% to +1% most of the times can be seen in this normal distribution chart. It reemphasizes the fact that
Index trades in tight range most of the days and starts trending only few days. we can make profit on range bound days with this 1%
Short straddle strategy.

We could see more number of times Nifty and Bank NIFTY moved between -0.30% to 0.30% on daily basis, in the above chart which
shows the daily return distribution of index. Only lesser number of days it has moved wildly on either side.

We can control our risk when market moves wild and also we can continue to make profits when market stays in range bound, if we fol‐
low Short Straddle Strategy, with a fixed stop loss.

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.500, then our stop loss is 625, 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.

When tested with one lot, the returns are amazing.

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It has ended up in profits almost every month

Nifty short straddle:

We tested the same strategy with Nifty as well with same rules and the returns are perfect.

On monthly basis, returns are consistent as well

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Most of the days are profitable days for Bank Nifty Straddle bot users

Here’s the live performance metrics for one lot, from July onwards due to increased SEBI margin, we recommend users to trade with 3
lacs per lot.

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Re-Entry:

Along with lot size input, we have added Re-entry option also. In this, users can opt for re-entry if they want. So the user can reenter the
original leg at previous entry price.

For example, if we sell an ATM call, entry price was Rs 500, SL is 25%, so SL price is Rs 625. Now if SL is hit, we will choose the same
ATM call strike to enter and wait for its price to come back to Rs 500 before we re-enter the same option. SL will remain 25% upon re-
entry.

The potential profits are much higher if you select re-entry.

Here’s the backtest results of BNF straddle with re-entry

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