Strategy description

Strategy Description

A premium-decay and trend-following strategy on NIFTY, designed for traders seeking balanced risk with high reward potential. It uses directional logic, dynamic hedging, and strict risk control to capture short-term trends while staying protected in volatility.

Fully automated to manage entries, exits, hedges, and stop-losses, allowing steady capital growth without emotional intervention.

Core Logic

1. When Market Trend is Bullish:
   1. Sells a near-the-money Put Option (PE) to capture premium decay
   2. Buys a farther Out-of-the-Money Put (PE) as a hedge and margin reducer
2. When Market Trend is Bearish:
   1. Sells a near-the-money Call Option (CE) to benefit from downside momentum
   2. Buys a farther Out-of-the-Money Call (CE) to cap risk and reduce exposure

Risk & Reward Framework

1. Pre-defined Target %: Locks in profit once the set target is reached
2. Dynamic Stop-Loss %: Cuts losses early to protect capital during trend reversals
3. Always Hedged Positions: Protects from overnight gaps and volatility spikes
4. Capital Efficiency: Smart hedging lowers margin while keeping directional edge

Why This Strategy Works

1. Balances medium risk with high reward potential
2. Captures both directional moves and premium decay
3. Automated risk control reduces emotional decision-making
4. Works well in moderately trending markets with clear direction
5. Live-tested logic refined through real-market performance

Strategy Details

1. Underlying: NIFTY Options
2. Capital Required:₹1,60,000 per multiple
   1. Actual margin usage may be less than ₹1,00,000 per multiple.
   2. ₹1,60,000 is recommended as a buffer considering historical drawdowns.
3. Type: Directional Theta earner
4. Holding Period: Overnight position (Hedged)
5. Average Trades per Day:~4 trades (entry + exit), depending on market conditions
   1. Some days may have no trades.
   2. Some days may carry positions from the previous day without initiating new trades.
6. Designed For: Traders seeking consistent, higher-reward setups with controlled drawdown

Disclaimer

1. Smart Algo is not a SEBI-registered advisor.
2. Trading in derivatives carries significant risk.
3. Past performance is not indicative of future results.
4. Strategies should not be deployed solely based on historical performance.
5. Paper trading for at least one month is strongly recommended before going live.
6. Deploy only if you fully understand and accept the associated risks.

Note

1. Trading strategies are not shortcuts to instant wealth.
2. Consistency and discipline are essential for long-term success.
3. Algo trading helps reduce emotional decision-making and performs best when given sufficient time.
4. Allow at least 2–3 months for the strategy to demonstrate its real potential.
5. Avoid manual intervention such as pausing, force exits, or modifying trades.

Contact

1. Email: [email protected]