Selling Index Options on Collateral: Low-RiskLow-VolatilityLow-BetaLow-ExposureLow-DeltaRisk-ManagedReturn-OptimizedRisk-AverseLow-TurbulenceSecure-GrowthControlled-Risk Fully Automated Passive Income Models.
The Theta model integrates the Lavania and Archimedes strategies, leveraging a Hidden Markov Chain model to statistically analyze historical price transitions, thereby enhancing price movement predictions. By distinguishing OI-based models and applying a Bayesian inference framework on price action, the Theta model significantly enhances its predictive accuracy and overall performance, marking a substantial advancement from its manual predecessor.
It's a combination of two strategies.
Options spreads are sold with a breakeven point between the preceding Support and Resistance levels, as delineated by the Price Action theory on a daily timeframe. The strategy initiates a position on the day following the expiry and closes the position on the day of expiry.
On the day of expiry, theta reaches its peak. Therefore, if the Positional Strategy is profitable, a trade is initiated on the day of expiry after closing the Positional Strategy. This approach employs a narrower range and more stringent risk management measures.
SEBI has released circular no. SEBI/HO/MIRSD/DOP/P/CIR/2022/117 on September 02, 2022, regarding the performance/returns claimed by unregulated platforms providing algorithmic trading strategies, imposing restrictions on disclosing past performance or anticipated returns of any strategy. Due to slippage and varying costs (e.g., different brokerage fees), strategy returns exhibit significant fluctuations. That’s why, we are presenting backtested benchmark results instead.
For risk management and rebalancing, several factors are taken into consideration:
Fundamental Events – Like such speeches by the Prime Minister or Finance Minister, rate changes, Supreme Court rulings, key AGMs, GDP updates, report outcomes, significant happenings, etc.
Option Greek Anomalies – The nuanced interplay of Delta, Gamma, and Theta unveils a spectrum of strategic prospects
Open Interest Data – Monitoring spikes in open interest and employing various open interest models like the volatility cone, max pain deviation, etc.
Certain Statistical Conditions – Leveraging advanced statistical methodologies like Bayesian Inference alongside Markov Chain processes, the model discerns underlying market dynamics, aiding in the meticulous crafting of exit strategies to mitigate risks and preserve capital.
Each leg of the trade is monitored individually as if they are separate trades. There are two methods for profit maximization:
Stop Loss Optimization – Exit the trade when the premium expands and reaches the stop loss level, then re-enter based on new resistance (for call options) or new support (for put options).
Profit Optimization – Exit the trade once a specified percentage of the premium has been eroded, to potentially seek better opportunities.
Typically, various rebalancing systems are employed based on the account’s past profit, which often leads to deviations from the projected graph.
Initially, the model began with 1 Lot, but as the Lot size and margin varied over time, it’s currently impractical to proceed with 1 Lot due to the fixed per-order brokerage cost, especially given the reduction in quantity from 40 to just 15.
Subsequently, NIFTY was incorporated into the weekly options strategy. Currently, even though Bankex, MidcapNIFTY, and FINNIFTY have initiated weekly options, they are markedly illiquid.