created : 1 year ago| |  live deployment: 4

created : 1 year ago |  live deployment: 4

Yo! Option Buyer! -N

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Strategy description

This is a positional option buying strategy which buys monthly ITM options in Nifty based on the trend using basic trend following indicators. Don't ask me what? it is so simple yet effective.   


Capital Required: 50k. Actual margin required would be around 35k and 15k is buffer capital for managing losses if any. Historical DD is not considered in the capital mentioned.
Entry/Exit time: There is no defined entry or exit time. It works based on signals and takes long or short position any time. 

Target: Open target - finding trend is tough and if it is found, why settle for a fixed profit? Ride the trend as long as it goes. 

Stop Loss: Rs.10,000 per counter is hard stop loss (it could be from one position or multiple positions in same counter)

Trailing Stop Loss: 5k is the minimum threshold. Once MTM PNL reaches 5k at counter level (not individual strikes), TSL starts at 0. For every Rs.1000 increase in profit, TSL trails by Rs.1000. Eg., if your PNL is 5k, SL will be 0. If PNL is 8500, SL will be 3000 and so on...


1. Can I deploy any time or is there any suggested time?

Ans: Yes, the algo can be deployed any time. It takes the trade when signal is generated. During last week of the month, Theta decay is severe and works against option buying but if the trend is strong, it overcomes the theta decay as well. 

2. Can I increase or decrease multiplier when the trade is active?

Ans: By the design of the algo, increase or decrease of multiplier does not impact the positions or sq. off of positions. It is not advisable to increase or decrease the multipliers incosistently. We see that such changes results in lower profit or higher loss as people increase multipliers after profitable entry and next entry may be a loss or vice versa.  

3. I have exited manually, how to re-enter?

Ans: New entry cannot be made again until the trend reverses and new signal is generated. You can refer the active strikes in paper trade to verify if the direction matches or not.

4. Is it monthly options or weekly options? Are there slippages?

Ans: This algo deals with monthly expiry options with an idea that the theta decay is slower than weekly options. Since it deals with ITM options, slippages are inevitable however the algo picks strikes which are in '00s and avoids '50s.  Hence the slippages are slightly negligible. 

Theta is an enemy but as long as trend is captured, it overcomes theta effect. Though 1 lot of option buy would not be more than Rs.35,000, I recommend to have a capital of Rs.50,000 to play with this strategy as the drawdown could be severe. 4-5 loss trades will easily be compensated with one trend which will make it profitable. 

Test with paper trade and then go-live if it is interesting. 


Although the algo takes care of the entry, exit, adjustments, you are advised to keep an eye over the account to watch for any errors which could be due to margin shortage or technical issue etc.


Disclaimer: I am not SEBI registered advisor or Portfolio Manager. I do not take responsibility for any losses that might occur as a result of deploying this strategy nor do I guarantee any returns. If you are not aware of risks associated with FNO trading, you are strongly recommended to understand, analyse and then trade on FNOs.

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