Sample Strategy - STBT (Sensex)

Disclaimer:

This document is for informational purposes only and describes the mechanics of the strategy as configured on the Quantiply platform. It is not financial advice. Past performance of any strategy does not guarantee future results. Please ensure you understand the risks involved before trading with real capital.

Strategy Overview:

This is a positional STBT (Sell Today, Buy Tomorrow) strategy on SENSEX. Unlike intraday strategies that open and close within the same session, this strategy sells options on one trading day and holds those positions overnight, exiting them on the following trading day.

The idea behind STBT is to benefit from the premium decay that happens overnight. When you sell an option and hold it through the night, the option loses time value even while the market is closed. By the time the next day begins, you are already sitting on some unrealised profit from that decay.

Strategy Snapshot:

Overview of the key configuration parameters for this strategy

How trades enter and When:

At the defined entry time on Day 1, the strategy simultaneously sells:

• 1 lot of SENSEX ATM Call Option (CE)
• 1 lot of SENSEX ATM Put Option (PE)

Both legs are sold as NRML (Normal) positions, which means they are positional trades that are allowed to be carried overnight, as opposed to MIS (Margin Intraday Square-off) positions, which must be closed on the same day.

Risk Management:

Each leg has an individual stoploss set at 40%. This is a percentage-based stoploss, meaning it is calculated relative to the premium at which each leg was sold.

How the stoploss works:

A stoploss of 40% means exiting the leg if its premium rises by 40% from the entry price.

Example: If the CE leg is sold at Rs. 200, the stoploss triggers when the premium rises to Rs. 280 (200 + 40% of 200). At that point the leg is squared off immediately to cap the loss, regardless of whether it is Day 1 or Day 2.

If the stoploss is not triggered on Day 1, the position is carried forward as planned. The stoploss continues to be monitored on Day 2 as well, right up until the final exit time.

Exit Logic:

If neither leg hits its stoploss on Day 1, both positions are held overnight and squared off (bought back) on the next trading day at the configured exit time.

The exit on Day 2 is a simple buyback of both the CE and PE legs that were sold the previous day. This closes the position and realises whatever profit or loss has accumulated between entry and exit.

How the Strategy Runs:

Day 1:

• The strategy sells SENSEX ATM CE and PE at the defined entry time.
• Stoploss at 40% is active and monitored for each leg independently.
• If either leg hits its stoploss, that leg is exited immediately. The other leg continues.
• If neither leg hits the stoploss by end of day, both positions are held overnight.

Overnight:

• Positions are carried as NRML holdings.
• Time decay works in the strategy’s favour during non-market hours.

Day 2:

• Both open positions are squared off at the configured next day end time.
• The stoploss continues to be monitored until the final exit is executed.

Why Run an STBT Strategy?

• Overnight time decay: Options lose value with every passing hour, including non trading hours. Selling before the close and buying back the next morning captures that decay.
• Gap movement benefit: If the market opens flat or gaps in a favourable direction the next morning, the short straddle can benefit from the reduced premium at open.
• Lower intraday noise: By not managing the position through the full intraday session, the strategy avoids reacting to short-term price swings that often reverse by the end of the day.

Key Things to Know

• This strategy requires NRML margin, not MIS margin. NRML margins are higher because the position is held overnight. Make sure your account has sufficient margin before the position is carried forward.
• Overnight risk is real. Unlike intraday strategies, STBT positions are exposed to after hours news, global market moves, and gap openings. A large adverse gap at open can cause the stoploss to trigger immediately on Day 2.
• The 40% stoploss applies on both days. The stoploss is active from the moment of entry on Day 1 and remains active through the Day 2 session until the final exit.
• Each leg is managed independently. If one leg hits its stoploss on Day 1, only that leg exits. The other continues to be held overnight and exits the next day as planned.
• Always check for expiry dates. If the options being sold are expiring the next day, the time decay benefit is maximised but so is the gamma risk around open. Plan your entry accordingly.