Bank Nifty Weekly Strategy

Entry: At 0930 AM, 1 day before expiry
Instrument: Sell ATM CE and PE based on spot price
Stop-Loss: 80% for both the legs
Exit: 1:30 PM on expiry day
Slippage: 0.5%
Capital Needed: 1,05,000

Note: In case by the end of Wednesday, if one leg has hit the SL and other leg's premium is less than 10% of its entry premium, then it can be squared off before end of day Wednesday as there is not much premium left on it for further decay on Thursday (Expiry day). 

Note (26-Nov-22): As we are now into low VIX environment, I have stopped using hedges from past 2 expiries. Will shift back to hedges once the VIX increases beyond 20

Note (4-Feb-23): For week ending 3-Feb-23, the strategy hit its maximum loss in history without hedges being in picture as both SL were hit on Wednesday itself so back tested details with hedges is being dis-continued. Updates will be provided for back testing without hedges only. 

Updated as on 4-Aug-23 end of day

Back testing

Actual Trades based profit/loss

(Started trading from 23-Feb-22

Stopped trading after 2-Feb-23

Started trading from 29-Mar-23

Stopped trading from 4-May-23)

Week wise actual trades for Apr 23

Reason for high difference b/w Back testing & Actual

13-Apr-23: SL got skipped because of Finvasia issue

Historical Data

Mar 2023

Reason for high difference b/w Back testing & Actual

29-Mar-23: Trades got squared off at Wednesday end because of logical setup issue

Feb 2023

Jan 2023

Reason for high difference b/w Back testing & Actual

19-Jan-23, 25-Jan-23: Trades got squared off at Wednesday end because of logical setup issue

Dec 2022

Nov 2022

Reason for high difference b/w Back testing & Actual

3-Nov-22: In real trade PE side SL was hit at market open as Bank Nifty market opened with gap down at open and then recovered quickly within a minute. As back testing platform doesn't consider 09:15 candle, in back testing SL was not hit and then market expired near to 42300 at day end. A logic change is made to not to trade in opening minute to avoid spikes as the position is already hedged so risk is less. 

11-Nov-22: As market was at same Spot level which was there are 09:30 squared off trade by Wednesday 15:28 and took new ATM straddle on Thursday 09:16 with 80% SL based on 09:16 price. This helped in accumulating more profit in actual trading as compared to the back testing. 

Oct 2022

Reason for high difference b/w Backtesting & Actual

6-Oct-22: CE leg exited at less premium as compared to SL set because by the time TT squared it off, the price had come down for the leg from day high. This happed at day open (9:15 candle). Also had taken a OTM6 CE/PE buy position as hedge before Wednesday day close and that squared off at no profit/loss on Thursday open. 

27-Oct-22: Took hedges 500 point away from 0930 ATM strike  which went into 1 k loss on market open 

 

Sep 2022

Reason for high difference b/w Backtesting & Actual

8-Sep-22/22-Sep-22: I take 80% SL based on average premium e.g. if CE is sold at 200 and PE at 220 then I will keep SL at 80% of average of 200 + 220 i.e. 80% of 210 on both side instead of 80% of individual legs. 

15-Sep-22: No trade taken

29-Sep-22: Took hedges before EOD as after hitting CE leg's SL market had reversed and to reduce further downside in open PE leg hedges were taken. Hedges helped in recovering the loss when market opened gap up on next day

BT-Hedged - Profit based on back testing of strategy with hedge taken at end of day

Actual - Profit based on actual trades taken for strategy

Date	Day	BT-Hedged	Actual
3-Mar-22	Thu	1087	855
10-Mar-22	Thu	8860	855
17-Mar-22	Thu	326	153
24-Mar-22	Thu	-443	951
31-Mar-22	Thu	2910	5783
7-Apr-22	Thu	6177	6023
13-Apr-22	Wed	162	655
21-Apr-22	Thu	4385	4654
28-Apr-22	Thu	-5335	-4589
5-May-22	Thu	858	663
12-May-22	Thu	5970	1049
19-May-22	Thu	9689	9358
26-May-22	Thu	3092	2971
2-Jun-22	Thu	5615	5580
9-Jun-22	Thu	5600	1540
16-Jun-22	Thu	-3	2477
23-Jun-22	Thu	-6012	-6402
30-Jun-22	Thu	-3356	-110
7-Jul-22	Thu	-4298	-3099
14-Jul-22	Thu	-2547	-2276
21-Jul-22	Thu	-580	3509
27-Jul-22	Thu	3034	-4148
04-Aug-22	Thu	125	-560

Reason for mismatches b/w back testing result and actual trades:

10-Mar, 31-Mar, 12-May: Hedge was not taken in actual trade

9-Jun                                : Trailing stop loss was hit in actual trade

16-Jun                              : Hedge was not taken as BN was near to ATM straddle price and options had high premium on Wed market close because of pending FOMC meet. Was expecting a crush in premium price. Also as BN was near to straddle price so gap up/down of up to 2% was not going to have much impact on profits. 

30-Jun-22: As BN was at same level at end of Wednesday at which straddle was entered at 0930, didn't take the hedge as a gap up/down of 1 to 2% can be accounted for with the premiums available. 

7-Jul-22    The SL on CE side was hit at market open on Thursday because of gap up. Now in actual trades the option was squared off as soon as market opened however the back testing engine takes the first candle of 0916 for calculation and the CE price went up by 44 points b/w 0915 and 0916. 

21-Jul-22    The SL for CE leg was hit in back testing but it didn't hit in real trade and at around 1:30 PM market reversed thereby giving good profit in actual trade

28-Jul-22    Actual trade was taken at 10:30 instead of 09:30 because of issues with Finvasia broker. Because of the CE leg SL was not hit on Wednesday and on Thursday market opened gap up thereby CE leg gave loss more than the SL based loss. In back testing the CE leg SL was hit on Wednesday itself at 80% as entry was at 09:30. 

Note: I am not a SEBI registered advisor and the details shared here are for learning purpose only