Rajandran R Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, USDINR and High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in)

Is the 9:20 Straddle No More Working?

1 min read

The 9:20 AM Short Straddle strategy gained prominence for its ability to capitalize on the intraday market volatility witnessed between 09:20 a.m. to 3:15 p.m. By selling both a call and a put option (Weekly Option) with the ATM strike price and the same expiration date, traders aimed to profit from market movements, regardless of the direction.

As the strategy became more popular, a surge in option sellers embracing the 9:20 AM Short Straddle led to increased competition. This influx of sellers impacted premiums, making it challenging for traders to secure favorable risk-reward ratios.

What is the 9:20 Straddle Rule

1)Short Bank Nifty ATM CE and ATM PE Weekly Options (Short Straddle) at 9.20a.m
2)Once the Order gets executed. Place a 35% stop-loss order on both the legs
3)If one leg of the stop hits the other leg will still continue its trade unless the other leg stop is hit

Here is the Backtested Results for Bank Nifty Weekly Options Since 2017 (Commissions and Slippage of 0.5% added)

PNL Heatmap

Bank Nifty options, known for their volatility became a playground for option sellers. The year 2023 witnessed a change in market conditions, with lower volatility becoming a persistent theme. Traders who traditionally thrived on volatility struggled to find the same lucrative opportunities that characterized earlier years.

Backtesting Results for the year 2023 (Commissions and Slippage of 0.5% added)

Modification in Rules Required?

Instead of Executing the straddle at 9.20 with stop loss one can consider shifting entry to 10:30a.m which could have done much better compared to 9.20 straddles

The diminishing edge of the 9:20 AM Short Straddle in 2023 serves as a reminder of the dynamic nature of financial markets. Traders, ever-adaptive, must stay attuned to evolving conditions and be ready to adjust their approaches. While the strategy may have lost some of its luster in the current market environment, it also highlights the importance of continuous learning and the exploration of innovative strategies to navigate the intricate landscape of intraday trading. As the financial markets continue to evolve, so must the strategies employed by traders seeking success in this ever-changing arena.

Rajandran R Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, USDINR and High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in)

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