Those of you in the trading room would already know the changes that we have made to the existing Opening Spike trade by using OTMs instead of ITMs.
The Thesis - This strategy is about capturing the opening volatility, its a direction agnostic strategy and we aim to capture statistically optimal moves, with a fixed target and risk. We use NIFTY Weekly OTM Strikes to execute this strategy.
Here is the performance of the approach for the current month (As executed live in the Trading Room)
So what’s so great about it?
Well, several things.
Low Capital Requirement - Typically the OTM Premiums that we use are in the range of Rs. 20 to 25. We keep 4x of which as the allocated capital for this strategy.
Low Transaction Costs - Low premiums has a direct impact on STT and as you can see the strategy itself is designed to take very few trades. So on all counts low costs. *Example of a contract note below to give you a sense.
High Win Rate - Yes this approach has a very high win rate, we have statistically tested it.
So whats the catch?
Like all good things in life, this one comes with a few catches,
Time Dependent - This trade occurs at a specific time window, you need to be there to capture it.
Execution Skills - Yes, this one is the most challenging one, being a scalper its easy for me to execute this, but if you are new there could be a learning curve of close to a month at least to get this right.
Don’t attempt this by yourself. Unless you know what you are doing.
It looks simple but its not easy.
We factor in several variables to take this trade, its not a Price only thing.
Past performance is no guarantee of future results!