NIFTY Theta focuses on different negatively skewed option selling strategies to trade on the time decay i.e. theta of NIFTY monthly options exclusively.
- Capital Requirement – Varies on trade to trade.
- Trading Rationale – Varies!
- Risk – Varies! Mostly, the downside will be open towards unlimited drawdown! You’re advised to keep your own rational stop loss which is 10% of the employed capital on the whole setup. (e.g. If the setup is consisting of two trades, your stop loss is recommended to have at 10% of the employed capital consumed for two trades.)
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Quant Based Approach –
The quant-based approach means trading with a fixed margin which is called Quant. It allows us to monitor trades with proper risk management. We have two systems dealing with NIFTY options so far.
- A single lot system
- A double lot system
The recommended capital for the single lot system is 60K and double lot system is 120K. (Assuming NIFTY lot takes 50K for selling, keeping 10K as a buffer for stop loss. Maximum drawdown is 15% which is roughly 10K and 20K respectively.