DAYLIGHT
Intraday Option Buying
Day Light is an intraday strategy by DECIBEL CAPITAL that will be trading breakouts in BankNifty on an Intraday Basis. The strategy derives its name from the fact that there are no positions taken overnight.
Risk-Defined
These signals are going to be executed using Buy Options execution. This choice of instrument offers two benefits:
a. It allows max loss being defined at the start of the trade and thus no additional SL is needed.
b. It allows a lower point of entry into the system to trade, while offering a diversified income stream to investors.
The strategy will buy ATM Calls and Puts at the time of signal generation. It will buy 1 Lots of Options for each signal (and thus positions have a Delta of 0.5 at initiation) per trade for the given capital requirement at 1x. Since the holding period is small, it is expected that that performance will be similar to that of futures.
Please Note, the backtest of the strategy is on index data. The signals can be executed both using Futures or Options.
Capital Requirement
All strategies from Decibel Capital are introduced with a view of setting up a portfolio of strategies. DAYLIGHT aims to RE-USE the capital being used for another strategy by us - QUICK SINGLES. This strategy can also be used to put to use the extra capital that we keep as a buffer for our Principal Trend Following Method - DYNAMIC.
This strategy will trade 1 Lot of ATM CE or PE with 150,000 as capital in account. If you are already subscribed to Quick Singles, then you can deploy DayLight on the same capital. For a total capital of 300,00 you can deploy Quick Singles at 1x and DayLight at 2x.
Note: If you are deploying this strategy along with any other Futures strategy that keeps 50-60% of capital as buffer, then you can trade this with 1.5L and manage it as 1/6 exposure to your portfolio. However, if you are using this as a standalone strategy or without additional strategies on your account, we suggest you to use 200,000 as minimum capital.
Back Testing
Time Period: Jan'11 to Sep'21
Position Size: 1.0 Delta traded with 3 Lakhs of Capital to start with - Non-compounded performance shown in charts
Costs: 0.07% of turnover for slippage and commissions on BankNifty Index Level
Instrument: Index
Total Points Gained: The chart below shows total points gained by DayLight vs total points gained by BankNifty within the Backtest Period. This helps in understanding whether a strategy has a positive expectancy without any money management implemented.
Implementing money management for the same strategy, here are the performance metrics:
Implementing money management for the same strategy, here are the performance metrics:
Enhancing Returns with a Portfolio of Strategies
As stated above, the DayLight Strategy was created to "RE-USE" the capital deployed with Quick Singles. Whenever, two strategies are deployed on same capital base, there is always a risk of overall risk of ruin/drawdown to increase on the portfolio. We do not aim to increase leverage on our portfolio by using two strategies on the same capital. Rather, we want to deploy low/uncorrelated alpha strategies on the portfolio. A correlation analysis was conducted for the two strategies - Quick Singles & Daylight. The following chart shows monthly rolling correlation of two strategies. The overall correlation between the two strategies is "ONLY 0.14". Thus, the two strategies can be deployed on the same capital.
Here are the results of deploying a Combo of both these strategies on the same account:
The highlight of above analysis is that we have managed to add sufficiently large amount of total return to the portfolio, without getting any additional Drawdown.
WE HIGHLY RECOMMEND THAT YOU DEPLOY BOTH THESE ALGOS ON YOUR ACCOUNT TO GENERATE A SMOOTH EQUITY CURVE.
AUTOMATED TRADING
This algo can be LIVE Traded on your account by clicking on the following link. It trades ATM Weekly Options on Nifty and BankNifty.
Also includes LIVE Telegram Alerts as part of Subscription. Please email info@db.capital to activate after subscribing using below button.
Disclaimer: As with anything in trading, there is no guarantee that such signals will continue to present themselves profitably in future. Statistical patterns from past may deteriorate in future. Past performance is not indicative of future performance. Nonetheless, we keep a track of the performance of each signal and will replace/improve them with time based on their performance.