Bank Nifty ATM + OTM2

As many people wanted to know about this strategy, creating a blog post about this strategy. 

This is the strategy which I took from Nifty Hacks you tube channel as described here. In Youtube video it is named as ARK-A strategy

Now coming to rules of strategy:

Entry time: 0916

Exit time: 1510

Instruments at entry: Sell 1 ATM straddle (ATM CE/ ATM PE) and one OTM2 Strangle (ATM + 200 CE/ ATM - 200 PE) based on Bank Nifty spot

Stop Loss - MTM SL of 12k  4200 (MTM SL changed to 4200 from 21-Jul-23 onwards )

Target - 4200 7000 on non-expiry days and 12,000 on expiry

Capital - 3,10,000

Adjustments:  At every 200 point movement of Bank Nifty spot sell the loss making leg of earlier straddle taken and take a new entry in same type of leg to make sure that at current point we have a ATM Straddle + OTM2 Strangle. Also at a given time at max 3 legs of CE or PE strike will be active to manage margin. 

Example is given below:

(1) Say Bank Nifty at 0916 is 38,631 so ATM straddle at this point will be 38600 CE/38600 PE and OTM2 Strangle will be 38400 PE and 38800 CE. So positions taken will be (sell side)

38800 CE

38600 CE

38600 PE

38400 PE

(2) Now Bank Nifty moves up by 200 point based on earlier ATM strike (38600) to 38,800. At this point loss making leg of previous straddle i.e. 38600 CE will be squared and new entries will be taken in 38800 PE and 39000 CE to have a ATM Straddle + OTM2 Strangle at current spot price. Note at this point we will have 3 legs of PE at that is max we can have. So the positions will look like as (blue text means new entry/exit, strike out means it is squared off )

39000 CE

38800 CE

38800 PE   

38600 CE

38600 PE

38400 PE

(3) Once legs become more than 4 for a given side then we square off the farthest strike leg to maintain same margin. E.g. suppose after this bank nifty moves further up by 200 points to 39,000. At this point we will again square off loss making leg of previous ATM straddle i.e. 38800 CE and take new position in 39000 PE and 39200 CE to maintain ATM + OTM2 at current level. Now before taking into position in 39000 PE we will square off far PE strike leg of 38400 PE to keep margin at check. So the positions will look like

39200 CE

39000 CE

39000 PE   

38800 CE

38800 PE   

38600 CE

38600 PE

38400 PE

(4) Say after point 2, if bank nifty spot instead of going up to 39,000 went down by 200 points back to where we started i.e. 38,600. Now positions at point 2(When Bank Nifty spot was at 38,800) are :

39000 CE

38800 CE

38800 PE   

38600 CE

38600 PE

38400 PE

As it came back to 38,631, we will strike off loss making leg of previous straddle which is 38800 PE and take an entry in 38,600 CE back to have ATM + OTM2 combination at current level. Also we will leave 39000 CE as is as it is profit making leg and we can have up to 3 legs open of a given type, so positions will now look as

39000 CE

38800 CE

38800 PE

38600 CE

38600 CE

38600 PE

38400 PE

Now say Bank Nifty further goes down by 200 points to 38,400. So at this point 39000 CE will be squared off as only up to 3 legs of a given type can be open at a given time. So the positions will look as:

39000 CE 

38800 CE

38800 PE

38600 CE

38600 CE

38600 PE

38400 CE

38400 PE

38200 PE

This way our logic will keep on making adjustments for every 200 point move in Bank Nifty spot till it hits the overall MTM SL/Target or time reaches exit time of 1510

Note (8-Jul-23): MTM Target for strategy is now changed to 7k for all days (expiry as well as non-expiry days) as the overall premium itself is around 7k for the entire setup on expiry days so earlier target of 12k would never be achieved

Note (21-Jul-23): After Bank Nifty lot size change to 15 units, MTM Target as well as loss limit is changed to 4200 

Strategy is not back testable on Stock Mock or Algo test unless someone manually tests it using simulator on Stock Mock. Back testing details as shown below are from Tradetron

Back Testing

 Updated as on 30-Jun-23

Note: Back testing PnL for 28-Jun-23 and 30-Jun-23 is assumed as same as actuals as Tradetron back testing excluded these days while back testing for past 6 months on 1-Jul-23. This will get changed when back testing is again run on July end. 

Actual trade based Profit/Loss for 1x multiplier

(Updated as on 3-Nov-23)

(Started trading regularly from 15-Jul-22

Stopped trading after 15-Feb-22

Started trading from 5-Jun-23

Stopped trading from 11-Dec-23)

Actual trade results above doesn't include brokerage and charges

                                                        Day wise trades for Dec '23

Note: 0 value in Max Profit/Max Loss means that these values were not captured for those days, No value in BT field means the back testing field is not available for that particular day

                                                       Historical Data    

                                                                            Nov 2023

                                                    

Oct 2023

                                                                            Sep 2023

Aug 2023

Jul 2023

Jun 2023

                                                        Day wise trades for Feb'23

                                                            

Day wise trades for Jan'23

Day wise trades for Dec'22

Historical Trades

Nov 2022

Oct 2022

Sep 2022

Aug 2022

Jul 2022

Note: I am not SEBI registered advisor and strategies provided here are for learning purpose only