Strategy description

Strategy Description

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

The system is fully automated, managing entries, exits, hedges, and stop-losses 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 profits once the set target is achieved.
2. Dynamic Stop-Loss %: Cuts losses early during trend reversals.
3. Always Hedged Positions: Protection against overnight gaps and volatility spikes.
4. Capital Efficiency: Smart hedging reduces margin usage while retaining directional edge.

Why This Strategy Works

1. Balances medium risk with high reward potential.
2. Captures both directional movement and premium decay.
3. Automated risk control reduces emotional bias.
4. Performs well in moderately trending markets.
5. Logic refined through live-market testing.

Strategy Details

1. Underlying: NIFTY Options
2. Capital Required:₹1,80,000 per multiple
   1. Actual requirement may be less than ₹1,00,000 per multiple.
   2. ₹1,80,000 is recommended considering historical drawdowns and long-term sustainability.
3. Type: Directional Theta Earner
4. Holding Period: Overnight (Hedged)
5. Average Trades per Day:~4 (entry + exit)
   1. Some days may have no trades.
   2. Some days may carry positions forward without new entries.
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 does not guarantee future results.
4. Strategies should not be deployed solely based on historical returns.
5. Paper trading for at least one month is strongly recommended.
6. Deploy only if you fully understand and accept associated risks.

Important Note

1. Trading strategies are not shortcuts to instant wealth.
2. Consistency and discipline are essential for long-term success.
3. Algo trading performs best when given sufficient time to work.
4. Allow at least 2–3 months to evaluate real performance.
5. Avoid manual intervention such as pausing, force exits, or modifying trades.

Contact

1. Email: [email protected]