VOL HARVEST

This is an intraday Option Selling Strategy that has been designed to complement the base DYNAMIC - Trend Following - Futures strategy which is listed at the following link:

DYNAMIC - Trend Following System

The Base Trend Following Strategy starts to trade 1 Lot of Nifty and 1 Lot of BankNifty based on proprietary Trend Following indicator developed by Decibel Capital. To trade the Base strategy, a minimum capital of 9 Lakh is recommended.  This means about 5-5.5 Lakh capital is sitting idle in the trading account. 

 

As name suggests, Vol Harvest strategy aims to capture theta/volatility decay on an Intraday Basis. It will sell 1 Lot Straddle on each of Nifty and Banknifty weekly options on selective days. 

The strategy places MIS orders to ensure no overnight exposure is taken. However, for capital required calculation full NRML margin is considered due to upcoming changes to SEBI margin requirement. Hedge benefit is obtained while selling the straddle. Combined margin requirement for both Nifty(PE+CE) and BankNifty (PE+CE) Straddle sell is about 3.6-3.8L. 

 

This strategy is expected to be Low Correlated/Negative Correlated with the Trend Following strategy and thus should provide good diversification to one's portfolio. 

No Overnight Position

This is an intraday strategy and will square off all positions prior to market close everyday.

Backtesting

BANK NIFTY

Period - Jan'17 - Jan'21

Start Capital: 2,50,000

Slippage & Commission: 2%

TT - BankNifty - Backtest.png
TT - BankNifty - Backtest - DD.png

NIFTY

Period - Feb'19 - Jan'21

Start Capital: 2,50,000

Slippage & Commission: 1% 

TT - Nifty - Backtest.png
TT - Nifty - Backtest - DD.png

FORWARD LIVE TESTING

This strategy was put into Forward Live Testing in January 2021 and below is the forward tested performance of the strategy. As can be seen from the performance below, the strategy did well during months(March, April, May) when Trend Following systems across the markets took some hit. On the other hand, it was under water when Trend Following was working well (Jan and Feb'2021). 

TT - Forward Testing 01.png
TT - Forward Testing 02.png

For trading performance post May'2021 and for details on how to trade this on your portfolio, click on the following: