As you know, one of my primary strategy is momentum investing (MI) in equity (cash segment). Using those stocks as a collateral, I have been trading in options to generate additional/ weekly income.
MI is a “long-only” trend-following strategy with a longer-term time-frame
MI is a “long-only” trend-following strategy with a longer-term time-frame
of few weeks to few months. As such, it is very much dependent on the underlying market conditions. In a bull market, the returns will be high and during a bear market, the returns will be low (if not negative). In other words, MI is essentially a long-term “wealth-creation”
strategy and is susceptible to lumpy returns and therefore, MI is not something that I can rely on for my weekly/ monthly income.
It is for this reason that, using the stocks bought under the MI strategy (as a collateral), I have been trading options to generate my weekly/
It is for this reason that, using the stocks bought under the MI strategy (as a collateral), I have been trading options to generate my weekly/
monthly income. I have been trading options, both positional and intraday, although off-late with the SEBI requirement of maintaining minimum 50% of the collateral in “cash” form, it was getting more and more tough to do positional trades. Therefore, I started doing research
on what are the other good intraday option strategies that I can start trading and replace my positional strategies with. There were many of them out there, obviously, but the important part was finding a strategy which suited my style, temperament and trading personality.
And yes, very importantly, it had to be a strategy which could be traded manually (as in, without an algo-trading platform). Call me old-school maybe, but somehow I am not very comfortable with algo-trading.
Not sure if I ever will be able to trust a computer with my hard-earned money 😃🤣. So, for now, I am more comfortable in placing each trade with my own hand right in front of my own eyes, after double/ triple checking the order that I am placing.
It is in this context that I
It is in this context that I
started researching on the 9:20 strategy. Although I have been hearing about the strategy for a long time now, I had never traded it myself. I read a lot of tweets/ articles, about it, saw a lot of YT videos, and also spoke extensively about it with other real-life
practitioners of the strategy (such as @jitendrajain, @itjegan, @kirubaakaran and @GoldenDustbin — who were extremely helpful). I also spent a lot of time backtesting it on stockmock.
After doing the research, I started trading the 9:20 strategy and started experimenting
After doing the research, I started trading the 9:20 strategy and started experimenting
with it. As you all know, 9:20 is more a generic name for the strategy and does not necessarily indicate that you will take the trade exactly at 9:20. 9:20 basically stands for any short-straddle strategy (with a fixed SL applied on both the legs) entered into at any point of
time during the trading day. There are millions of permutations that can be used to trade the 9:20 strategy. Some people enter only once a day with just one fixed SL. Some enter multiple times during the day with just one fixed SL. Some enter multiple times during the day
with different SL on each day of the week.
When I started experimenting, I also started with few of such permutations. Over the last few weeks, I traded various permutations (with different entry times, different stop-losses, etc) with a small qty and basically tried to get
When I started experimenting, I also started with few of such permutations. Over the last few weeks, I traded various permutations (with different entry times, different stop-losses, etc) with a small qty and basically tried to get
a hang of it. Finally, after doing a lot of these small-qty trades across many such permutations, I decided on some entry/ SL rules to trade the 9:20 strategy in my own unique way. I am still very much in an experiment stage, but I am now trading with full capital, because
unless you trade with full capital, you can’t really know whether your emotions will be able to handle the strategy or not.
So, how do I exactly trade the 9:20 strategy?
One thing we all know is that nobody knows what the market is going to do. The market at 9:20 may be
So, how do I exactly trade the 9:20 strategy?
One thing we all know is that nobody knows what the market is going to do. The market at 9:20 may be
completely different from the market at 10:20 which may be completely different at 11:20, etc. Secondly, somedays the market will be completely side-ways, somedays it will be full-on trending, somedays it may be extremely choppy (neither sideways/ nor trending). So, given that
we can never predict what the market will do any time during the day, I thought, why not structure my 9:20 trades in such a way that I try to cover all types of markets during all times of the day?
It is for this reason, that I came up with the idea of doing 15 straddles
It is for this reason, that I came up with the idea of doing 15 straddles
during the day, each having a different entry time and each having a different SL. Now, that’s not to say that I enter into a straddle during 15 different times of the day. Some of the straddles may be entered into at the same time, but with different SLs. But basically, on
a stand-alone basis, it’s like having 15 different straddles with each one having it’s own entry time and SL%.
The idea, as I said before, was to cover all points in time during the day and with different SL% to cover both trending days vs sideways days. For instance, a tight
The idea, as I said before, was to cover all points in time during the day and with different SL% to cover both trending days vs sideways days. For instance, a tight
SL% will make good profit during a one-way trending market, but will suffer loss during a choppy market with possibly both SLs getting triggered. On the other hand, a wider SL will make good profit during a choppy/ sideways day, but will make loss during a trending day. So,
the idea was to have different SL% to cover all possibilities.
Also, the idea was to enter at different points in time during the day, because somedays, the market is trending in the morning, but sideways thereafter, or vice-versa, etc. So the idea was also to cover
Also, the idea was to enter at different points in time during the day, because somedays, the market is trending in the morning, but sideways thereafter, or vice-versa, etc. So the idea was also to cover
different market conditions at different times during the day.
Now, this is where we get to the topic of “risk management” and “position-sizing”. I always try to be conservative and assume the worst case. Therefore, when I was deciding the position-sizing for this 9:20
Now, this is where we get to the topic of “risk management” and “position-sizing”. I always try to be conservative and assume the worst case. Therefore, when I was deciding the position-sizing for this 9:20
strategy, I assumed that both my SL legs will get hit during the day. Now assuming that happens, I decided the position-size such that my risk per straddle was 0.2% of my capital. In other words, my total/ max risk for the day was 3% of my capital = 0.2% per straddle
(multiplied by) 15 straddles during the day.
While theoretically the max risk per day is 3%, practically, the chance of both SL legs getting triggered for all the 15 straddles entered into during the day (each entered at different times and with different SL%) is very remote.
While theoretically the max risk per day is 3%, practically, the chance of both SL legs getting triggered for all the 15 straddles entered into during the day (each entered at different times and with different SL%) is very remote.
In fact, as you would see later, in the 4 days that I have traded this strategy with full-capital, this happened only once out of the 60 straddles that I traded (15 straddles per day into 4 days). So, practically, the risk may be much much lower than 3%, but let’s not even go
there. As I said, I wanted to assume the worst-case and do my position sizing such that even in a worst (and “extremely remote") case, the max risk won’t exceed 3%.
Another important point to note is that, since I wanted to keep the risk same (at 0.2% of capital) for all the
Another important point to note is that, since I wanted to keep the risk same (at 0.2% of capital) for all the
15 straddles, the quantity had to be adjusted accordingly. For a tight SL%, the quantity was more and for a wider SL%, the quantity was lower. I have built an excel model, where excel does all the calculations for me. I just enter the premium and the quantity is given to me
by excel, keeping the risk constant at 0.2% per straddle.
Lastly, for now, I am not trading the 9:20 strategy on Thursday. Somehow, I am not having the courage of trading the strategy on an expiry day when premiums are anyways so less. But maybe I may change my mind in the
Lastly, for now, I am not trading the 9:20 strategy on Thursday. Somehow, I am not having the courage of trading the strategy on an expiry day when premiums are anyways so less. But maybe I may change my mind in the
near future. Let’s see. On Thursday, I trade a completely different strategy of selling OTM strangle with fixed SL, where I trade only a single strangle for the whole day with a max risk of 0.2% of capital with a possible max reward of ~0.4-0.5% of capital. The only difference
is that I deploy my entire capital on that single strangle, so the qty is obviously much much bigger than what I would have traded in each of the independent 15 straddles on the non-expiry days.
This is the live result of my last five days. ST-1, ST-2 stands for the straddle
This is the live result of my last five days. ST-1, ST-2 stands for the straddle
numbers. Column EE stands for “execution error” (and in case you are wondering, why is there a +ve number, it is only because I ended up earning a profit on a wrong trade I punched and immediately rectified) and column “Expiry” stands for the expiry strangle trade. Column EQ
shows my equity curve. The starting capital of 2.59 Cr is the margin that I have available after deducting the hair-cut on my stock collateral. Cells shaded in “light blue” colour mean that 1 leg-SL was hit, cells shaded in “light orange” colour mean that both leg-SL was hit
(which as you would see, happened just once in the last 4 days) and the non-shaded cells mean that neither SL was hit.
For me, the important thing right now is to have consistency, as in having a daily consistent and reliable income. It’s ok if the daily income is small, so long as the equity curve is fairly smoother and the DD is very small.
All the amount mentioned are after deducting all
All the amount mentioned are after deducting all
charges and brokerage. Today’s numbers are provisional (as calculated by me basis my estimate of brokerage and taxes). Once I get the contract note at the end of day, I replace the numbers with the actual numbers, but there is not much difference. All trades are in
Bank Nifty only.
Questions/ suggestions are most welcome 🙏
Questions/ suggestions are most welcome 🙏
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