May 5, 2019

Kirubakaran Rajendran: An options trader who chose the automation route to success @kirubaakaran

Kirubakaran Rajendran........What I found out was that in most cases, Bank Nifty does not move beyond 1 percent from their open. The data corroborated with the conventional wisdom that says that the market stays in a range 70 percent of the time. Using this information as the basis I designed my options strategy around it.

I also found out that I will make money by selling call and put options if I select strike prices beyond these one percent range. However, there was a problem. If the Bank Nifty goes in one direction and beyond the range, the strategy would lose 2-3 months of profit in one day.

I looked for other data points to protect myself. I looked at open interest data to see where there is a position build-up and sell my options around them.

In this strategy, which I currently trade, I have three stop losses conditions which take me out of the trade if I lose around 1.5 percent of the capital. Using these stop losses, the strategy is now posting around 30-35 percent annualized return. Drawdown has never extended beyond 15 percent. Irrespective of the volatility level, the strategy has made money.

The period when this strategy is making losses is when there is a volatility shift from a low volatility phase to high volatility.

I start off the week with strangles but as the week progresses I take short straddle trades


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