Strategy description

Strategy Description

A premium-decay and trend-following strategy on NIFTY which combines directional logic, hedging, and predefined risk controls. It uses directional logic, dynamic hedging, and strict risk control to operate during short-term market movements with predefined hedging structures.

Fully automated to manage entries, exits, hedges, and stop-losses, allowing rule-based execution without manual and emotional intervention.

Note: This strategy is designed for my personal use and for educational purposes only. You may use it freely for paper trade and understand its behaviour in different market conditions.

Core Logic

1. When Market Trend is Bullish:
   1. Sells a near-the-money Put Option (PE) as part of the strategy structure
   2. Buys a farther Out-of-the-Money Put (PE) as a hedge, which may impact margin requirements depending on broker policies
2. When Market Trend is Bearish:
   1. Sells a near-the-money Call Option (CE) based on directional market conditions
   2. Buys a farther Out-of-the-Money Call (CE) as a hedge position

Risk & Reward Framework

1. Pre-defined Target %: Exits positions based on predefined conditions
2. Dynamic Stop-Loss %: Applies predefined stop-loss conditions to limit losses during adverse market movements
3. Always Hedged Positions: Includes hedging structures to manage risk during volatility.
4. Capital Efficiency: Hedging structures may impact margin requirements depending on broker policies.

Strategy Characteristics

1. Automated execution follows predefined rules without manual intervention.
2. Involves directional option positions combined with hedging and predefined risk controls
3. Includes positions linked to price movement and option premium behavior.
4. Performance may vary across different market conditions, including trending and non-trending phases
5. The logic is based on observed market behavior and may perform differently in the future

Strategy Details

1. Underlying: NIFTY Options
2. Capital Required: ₹1,60,000 per multiple (illustrative)
   1. Actual margin usage may be less than ₹1,00,000 per multiple.
   2. ₹1,60,000 is considered as a reference buffer based on historical observations
   3. Capital and risk figures are illustrative examples and should not be construed as investment advice or recommendations.
3. Type: Directional Theta-based strategy
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.

Disclaimer

This strategy description is for informational purposes only and does not constitute any investment advice, recommendation, or solicitation. Smart Algo is not a SEBI-registered advisor. Trading in derivatives carries significant risk, and past performance is not indicative of future results. Therefore, strategies should not be deployed solely based on historical performance. Users may consider paper trading for a month or two to better understand the strategy’s behavior under different market conditions. Any decision to deploy this strategy should be taken independently after understanding the associated risks and after consultation with your financial advisors.

Note

Trading algo strategies are not shortcuts to instant wealth. Trading outcomes depend on multiple factors, including market conditions and execution discipline. Algo trading follows pre-defined rule based execution. Performance may vary depending on market conditions and execution.

Contact

[email protected] (No advisory services are/will be provided via this contact. This contact is for technical or operational queries only.)