Sunday, 14 November 2021

Trading strategy for Banknifty

Safe Banknifty trading strategy for regular income from market


Here you will learn a safe strategy for trading banknifty using options

The best way to trade volatile instruments like BNF, deploy a directional and non-directional strategy. 

I deploy BATMAN strategy around 45 days to expiry. This strategy gives has a wide range and works pretty well in volatile markets. I deploy non-directional strategies like an iron condor or iron fly using weekly options. 

I exit from the strategy once it reaches near breakeven or just break the breakeven point. I simply make a new deployment using the same process. I set up an alert in Zerodha sentinel to track future levels where I should exit and a warning in the sensible option tool once the weekly strategy gives a 2% return. 

I use Zerodha for weekly options and Goodwill broker for monthly expiry strategy. 

Banknifty trading strategy for options - BATMAN
  • BUY long straddle at ATM
  • SELL OTM option. 
The critical point of this strategy is the range. This strategy can give losses beyond 35800 and above 43100. 

This strategy provides a loss in the central point ( i.e., 39500) if the debt for buying the long option is more than credit received due to the selling of OTM options. I minimized the loss by selling farther OTM   36000 PE and 43000 CE.
  • It is reasonably safe because it has  7000 points range.  
  • OTM legs decay fast 
  • Strategy becomes profit once it moves on either side. 
Positions details 

As of 14th November, the strategy generated a 2% return. 

In the following article,  I will discuss more than adjustment using vega and delta. 
This will be a long post and will update daily till I close the whole position.
Banknifty is a high volatile instrument. 

Banknifty trading strategy for options - BATMAN

Strategy can be credit, debit, or almost debit=credit condition.
I deployed this strategy on 9th November for December expiry. 
I long straddle at 39500, which was almost ATM at the time of execution of the strategy. 

Payoff chart for BATMAN strategy

Why do I consider this as a safe strategy?

My exit conditions :

1. 3% profit over total margin deployed 
2. Delta of short OTM legs coming close to 40 delta 

I avoid any adjustment in the existing options strategy existing because of volatility mismatch... Volatility impacts buyers and sellers. This position is very much sensitive to vega as it has a high negative Vega. Vega is more than 5 times theta. 

This means 5 days of theta decay will require to balance a 1% rise in volatility.  

Date : 15--11-2021   10:45:00

I closed the trade. The trade gave profit 9246. The yield did not include expenses for the trade. 

Trade gave a profit of 3% within 6 days. 

 I initiated BATMAN  strategy with 4 lots for December and 25th November weekly Ironfly.

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