Using this functionality the algo selects strike prices for entry with premium that are close a calculated percentage of the total ATM CE & PE premiums.
1. First the ATM strike is derived after checking the spot price.
2. Straddle price is calculated, ie. the premiums of ATM CE and ATM PE are summed up to get the total premium.
3. A percentage of this total premium is calculated based on the percentage setting configured by the user.
4. Once the premium is derived, strikes with premiums close to or higher than or lower than this calculated premium are selected for entry.
1. Close to / Higher than / Lower than selection.
2. Percentage of straddle premium.
1. Suppose current spot price is 40023. The ATM strike is 40000.
2. If ATM CE premium is 222 and ATM PE premium is 273, then the total straddle premium would be ATM CE premium + ATM PE premium = 495.
3. If user has given a setting of ~ 50% SP, then the entry premium is calculated as 50% of 495 = 247.5.
4. Finally, a strike price which has premium close to 247.5 will be selected for entry.
5. Similarly, if user selects higher than or lower than, then the strikes selected will have premiums higher than 247.5 or lower than 247.5 respectively.