The 920 Straddle Strategy Defined

The 920 Straddle is a popular intraday options trading strategy activated around 9:20 AM. It involves simultaneously buying or selling an At-The-Money (ATM) call and put option of the same underlying asset with the same expiration. This approach capitalizes on significant market moves in either direction post the market opening volatility.

Meet AlgoTest

AlgoTest is an advanced Algo trading platform that empowers traders to automate, test, and execute trading strategies with precision. It's where the complexity of the market meets the simplicity of technology.

Creating & Backtesting a 920 Straddle Strategy

The Backbone of Strategy Testing: Backtesting

Backtesting is the cornerstone of strategy validation. It assesses the viability of a trading strategy by simulating its performance using historical data. This evaluation helps traders gauge potential profitability and risk.

Crafting and Validating a 920 Straddle in AlgoTest

Creating a 920 Straddle within AlgoTest is seamless. Traders can set their parameters, and with a few clicks, backtest their strategy against historical market data. AlgoTest's robust analytics provide detailed insights into the strategy's performance, allowing for fine-tuning before taking it live.

Steps to Create & Backtest a Strategy in Algotest?

What we are going to do is create a famous 920 short straddle strategy with 25% SL in Algotest. To create a strategy for Algotest, we will follow a simple set of steps. Here is a general guide:

Create an account at https://algotest.in.
You will get 25 free backtests every week.
To Create a strategy, first Click on Create Strategy on the AlgoTest dashboard as shown in the image below.

It will open a new strategy creation page as shown in the image below

Let me explain some of the features of the Instrument Settings & Entry Settings Section you should know about to create this strategy.

Strategy Type:- Intraday/BTST/Positional:- We have the option if we want to create an Intraday strategy or positional.
Entry Time:- The time at which we want to enter our strategy.
Exit Time:- The time at which we want to exit our positions.
Select Index:- Here we can select the instrument ( For example nifty/bank nifty/Sensex etc)
Underlying from:- Cash/futures:- If we select cash it means our strikes will be selected based on index spot price or futures price.

According to our Strategy, we are going to enter—

Strategy Type:- Intraday
Entry Time:- 9:20
Exit Time:- 3:10
Index:- Nifty
Underlying:- Cash

Set up these as shown in the image below

Let me explain some more features of Leg Builder you should know about to create this strategy.

Select Segments:- You can select segments between Options/Futures
Total lot:- Enter the Quantity
Position:- Can select if you want to buy an option/futures or sell an option/futures
Option Type:- Can select between Call/put
Expiry:- Option to select if you want to trade this week's expiry/ next week's expiry/ monthly expiry
Select Strike Criteria:- Different Methods to select a strike

Now we have to add a call leg from the leg builder. So, According to our Strategy, we are going to enter

Select Segments:- Options ( Because we want to trade in options)
Total Lot:- 1 (Quantity we want to test with 1 lot)
Position:- Sell (We are Selling a Straddle here.)
Option Typing:- Call (First we add a Call leg then in the next step we will add a Put leg)
Expiry:- Weekly (We want to trade only in the current week's expiry)
Select Strike Criteria:- Strike Type – ATM (We want to sell ATM Call)

Set up the above settings as shown in the image below.

After setting up the condition as shown in the above image, click on Add Leg. It will show you the interface as shown in the below image.

In the above settings, we have added a sell ATM Call leg from leg builder. Now we are going to add a Sell ATM Put Leg from Leg Builder. So enter the below settings in Leg Builder & click on add leg.

Select Segments:- Options ( Because we want to trade in options)
Total Lot:- 1 (Quantity we want to test with 1 lot)
Position:- Sell (We are Selling Call & Put so selecting Sell here)
Option Typing:- Put (Want to Add Put Leg Now)
Expiry:- Weekly (We want to trade only in the current week's expiry)
Select Strike Criteria:- Strike Type – ATM ( We want to Sell Straddle so selected ATM)

After Clicking on Add leg, it will show you the interface as shown in the image below

Now we are going to set a stop-loss for both of these legs. For this, click on the stop loss icon as marked in the image below, and select Percentage. Then, Enter 25 in the percentage field as shown in the below image.

So now we can save our strategy. Click on the save button on the bottom right & save this strategy with any name(for example 920 straddle) you like. Now to Backtest this strategy select the time for which you want to backtest and click on backtest as shown in the image below.

It will show you the backtest results and stats of this strategy as shown in the image below. To know how to interpret these stats please click here.

III. Forward Testing the 920 Straddle Strategy

Forward Testing: The Rehearsal Before the Show

Forward Testing, or Paper Trading, is the next logical step. It's a risk-free way to test a strategy in real time without putting actual capital on the line.

Test Driving the 920 Straddle in Market Conditions with AlgoTest

AlgoTest's simulated trading environment mimics live markets, enabling traders to forward test their 920 Straddle. It's a real-time rehearsal that builds confidence in the strategy's real-world applicability.

How to do Paper Trading/Forward Test in AlgoTest

Requirements

AlgoTest Account

You need to have an AlgoTest account to do a forward test. If you don’t have an AlgoTest account, you can create one by clicking on this link.

A Strategy

You need a strategy on AlgoTest that you want to deploy for Forward Testing.

Forward Test Execution Plan

To do a Forward Test on AlgoTest you need to buy a Forward Test Execution Plan. To know about pricing and purchase of the execution plan, check here.

Login to AlgoTest

First, you need to log in to your account in AlgoTest. To log in to your account follow some simple steps

Go to the AlgoTest website and click on the login button in the top right corner. If you don’t have an account click on signup and create an account.

Enter your Registered Mobile Number and Password and click on the ‘Login’ button to log in to your account.

Steps to Forward Test 920 Straddle Strategy

To activate your strategy for paper trading follow some simple steps as shown below.

Click on the ‘Forward Test’ button as shown in the image below.

Now it will show you your strategies under ‘Strategies’ as shown in the image below. It is important to note that your BTST, Positional & VWAP strategies will not show here.

Click on the Activate button to activate your strategy. Assume we want to activate a strategy named ‘AlgoTest Forward Test 2’. So we will click on the ‘Activate’ button on the right side of the strategy. It is important to note that you have to activate your strategy daily and you can activate your strategy between 08:45 AM to 03:28 PM. You have to activate your strategy at least 2 minutes before your entry time.

After you click on activate it will show you ‘Running’ on top of the page under Deployed Strategies as shown in the image below.

After your entry criteria are met, your strategy will take position. You can see your running MTM on this page as shown in the image below. You can stop the strategy by clicking on the ‘Switch to Manual’ button. You can square off the position in strategy at any time by clicking on the ‘Squareoff’ button. You can also see trade details by clicking on the ‘Trades’ button.

IV. Deploying the 920 Straddle Strategy Live

Embracing the Automated Trading Era

Algo Trading uses algorithms to execute trades at the best possible prices, speeding up the process and reducing the chances of human error. Its trading evolved for efficiency and effectiveness.

Going Live with Confidence on AlgoTest

With AlgoTest, deploying your 920 Straddle strategy live is a decision made with confidence. Our platform ensures your strategy goes live smoothly, backed by the insights gathered from rigorous back and forward testing.