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    What is Bank Nifty Theta Strategy?

    Risk Rating: High

    Description

    This Bank Nifty strategy is designed to capture theta decay which is gradual loss of option value over time. This strategy initiates a short straddle when the market appears to be rangebound or slightly trending and makes systematic adjustments during market movements.

    Key Details

    • Instrument: Bank Nifty Options
    • Trading Time: 9:20 AM to 3:15 PM

    How It Works

    • Initial Position:
      • The strategy begins by selling an At-The-Money (ATM) Call and Put (short straddle)
      • Trade Trigger: On significant market moves, a new ATM short straddle is initiated
      • The loss-making leg of the earlier straddle is squared-off
      • Up to 2 adjustments are allowed in each direction, with a maximum of 5 straddles per day

    Stoploss and Trailing Stoploss:

      • Every leg has a fixed stoploss to control risk and a trailing stoploss is used to lock-in profits if the trade moves in your favoured direction.
    •  

    Daily Trade Limit:

    • Maximum 5 short straddles (Call + Put) per day
    • Total of up to 10 option legs traded during the day

    USPs:
    • Instead of holding a single straddle, the strategy dynamically creates new staddles in both directions as the underlying moves. This allows the strategy to adapt to market movements rather than staying passive
    • When a new straddle is created, the loss-making leg of the previous straddle is exited, reducing risk exposure
    • No overnight risk exposure such as gap-up or gap-down
    • Works well in rangebound, sideways and trending markets

     

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