April May have been record breaking profit months for my CTM STBT OS based strategies. Unfortunately I gave a lot of it back with my directional strategies (OB)
Good question and one I have thought about deeply after trading NIFTY options for over a year.
Has retail option selling lost edge?
The edge from naked selling has shrunk significantly. Jane Street and similar players have made the tails more expensive and the moves sharper. A 3-sigma intraday move on NIFTY is no longer rare.
What still works:
Defined-risk structures — Iron Condor and Iron Butterfly — are the answer, not because they are safe, but because they cap your maximum loss. Naked selling gives you unlimited downside for limited premium. That risk-reward no longer makes sense.
What I found consistently works:
Enter Iron Condors only when VIX is in a stable range — not spiking, not collapsing
Adjust the short strikes based on VIX-derived expected move, not just fixed delta
Have a pre-defined breach trigger — when price threatens a short strike, roll or exit, do not wait and hope
One trade per day, first hour or not at all
On risk management:
Automation helps more than most people admit. The biggest losses in option selling come from emotional hesitation at exit. If your exit rules are automated, you remove that hesitation entirely.
Defined-risk only?
For retail — yes, in the current environment. The premium reduction from buying the wings is worth every rupee as insurance.
thanks that was such a great explanation, do you use any particular automation app? currently iam using zerodha with streak for triggers, wbu? Thanks again
I actually built my own automation — a Python bot that runs
on Zerodha Kite Connect API directly. It selects the strategy
automatically based on live VIX, RSI, and VWAP — Iron Condor,
Iron Butterfly, Long CE or PE depending on market condition.
Built-in stop loss, daily loss limit, and Telegram alerts.
Streak is great for simple triggers but I needed full strategy
logic with risk management baked in, which is why I went custom.
If you want more details feel free to message me directly.
Try shorting expiries falling beyond Weekly (5 Day) ATR x1.2 OR ATR x 1.3 range on Wednesdays at around 11:15 am for Nifty weekly expiries. So if weekly Atr is 700, short the strikes of ~ 850 each points from Atm. Works 80-85% of the times … Alternatively go for 4-5 delta … same results. Premiums may not be exorbitant, but PoP would be in high 90s. Do a paper trade for month before actual.
Good setup. ATR-based strike selection is underrated — most
retail traders just pick fixed delta without adjusting for
current volatility regime.
One thing I’d add: cross-check the ATR-based distance with
VIX-implied expected move. When they align — ATR says 850
points and VIX-implied move also suggests similar range —
the conviction is much higher. When they diverge, I’d be
more cautious.
Also worth adding defined-risk legs (buying further OTM
strikes) even if they cost 5-10 points each side. The 80-85%
win rate is great but the 15-20% losses can be severe on
naked shorts if there is a gap-up or surprise event. The
wings limit that tail risk significantly.
Wednesday entry at 11:15 is smart — enough theta decay
remaining but IV usually settles after the morning move.
I have been using a similar entry logic in my systematic
setup and the results are consistent with what you describe.
I don’t use any additional app. Kite has all the requisite indicators. Search for the Average True Range indicator in Kite, set it to 5 in parameter and switch to weekly timeframe. Whatever the ATR number on Tuesdays close or Wednesday by 11:15 am (max of 2), perform the math on it. As far as risk mgmt is concerned… whatever the combined premium (max profit), multiply it by usually by 2.5 or 3 (in case of vix above 18) to set as your exit loss, no firefights.
That’s a clean rule — max loss = 2.5x to 3x collected
premium, scaled by VIX. Simple to implement and removes
discretion from the exit decision entirely.
The VIX multiplier above 18 is smart. When VIX spikes,
premium expands faster than the underlying moves, so the
standard 2.5x can get hit before the position is actually
threatened. The 3x gives the trade room to breathe without
changing strike selection.
One question — do you adjust the multiplier dynamically
during the trade if VIX crosses 18 after entry, or is it
fixed at entry time?
Sl is adjusted dynamically after taking the trade. Generally vix spike has less effect on near expiry. In case I am still not convinced during the entry, then I simply switch to delta based strike prices eg. 4 or 5 deltas if the ATR seems too low. See it’s all about being comfortable while entering the positions rather than simply get into the positions as per the rule set. I refrain from entering the positions if I won’t be able to sleep at night thinking about the positions.
