Step-by-Step Intraday BankNifty Option Strategy:
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Instrument: Bank Nifty - This strategy involves trading options on the Bank Nifty index.
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Entry Time:
- First Entry - 9:20 am: At this time, we will enter our first trade.
- Second Entry - 9:50 am: We will also enter our second trade at this time.
- Strike Selection:
- We will sell a strangle by simultaneously selling a call option and a put option.
- The premium for both the call and put options will be Rs. 200 each.
- Stop Loss:
- We will set a stop loss of 20% on each leg of the trade.
- For example, if the premium for the call option is Rs. 200, the stop loss will be set at Rs. 240.
- The same applies to the put option.
- Moving Stop Loss:
- If the stop loss is hit on one of the legs, we will modify the stop loss for the remaining leg to the entry price.
For example, if the call option’s stop loss is hit at Rs. 240, we will modify the put option’s stop loss to the entry price of Rs. 200.
- Exit Time:
- We will exit the trade at 3:00 pm, closing any open positions.
Example:
Let’s assume the Bank Nifty is trading at 40,000 at 9:15 am. The premium for the 40,500 call option is Rs. 200, and the premium for the 39,500 put option is also Rs. 200.
Here’s how the trade would be executed:
- At 9:20 am, we sell both the 40,500 call and 39,500 put options.
- We set a stop loss of 20% on each leg, which is Rs. 240 for both the call and put options.
- Suppose the market goes up, and the stop loss of the call option is hit at Rs. 240.
- In this case, we modify the stop loss for the put option to the entry price of Rs. 200.
- At 9:50 am, we repeat the same process by selling new call and put options.
- If the stop loss is not hit by 3:00 pm, we cancel any pending orders and close all open positions.
Please note that the revised strategy takes into account the correct entry time at 9:20 am and ensures that both strategies are executed daily.