Welcome to an exciting blog post where we will discuss a highly effective strategy that can potentially generate regular profits on expiry days. With the recent news about Bank Nifty’s expiry shifting to every Friday, it has become crucial to develop a strategy that leverages these opportunities for consistent gains. In this blog, we will explore a safe and popular strategy that aims to minimize losses while maximizing profits on expiry days.

Our market is heavily influenced by the dynamics of expiry days. With the advent of daily expiries from Monday to Friday, traders are always on the lookout for strategies that can help them capitalize on these frequent events. This blog focuses on a well-known and widely strategy that can be applied to Bank Nifty, providing a framework to potentially earn regular profits.

Mr. Rayan Shubhadra, an experienced trader, has developed a strategy that aims to optimize profits while limiting losses on expiry days. This strategy has gained significant popularity due to its ability to deliver consistent results with minimal risk. Let’s dive into the details and understand how it works.

This highly effective strategy known as the ratio spread has gained high popularity in the market. By implementing this strategy, traders have been able to generate substantial profits on expiry days. While the ratio spread traditionally involves a ratio of 1:2 or 1:3, we will explore how to deploy it with a modified approach to maximize returns while minimizing risks. Additionally, we will discuss how utilizing small options for margin benefits can enhance the overall return on investment (ROI).

The ratio spread strategy involves creating a position with different quantities of long and short options. By adjusting the ratio, traders can customize their risk-reward profile according to their preferences. Although extreme ratios like 1:20 are highly unfavorable due to the significant risk exposure, we will focus on a more conservative approach that aims to provide consistent profits.

To optimize the ratio spread strategy, it is recommended to deploy the trade around 9:30 AM, allowing sufficient time for market movements to influence the options’ prices. By entering early, traders can potentially leverage price fluctuations for higher profitability.

In the event of losses in the lower or upper part of the ratio spread, it is crucial to implement risk management techniques to mitigate potential risks. This may include adjusting the position, taking partial profits, or employing stop-loss orders. Constant monitoring and flexibility are key to adapting the strategy as market conditions evolve.

To increase potential returns on investment, traders can consider purchasing small options from distant strike prices. This strategy reduces the overall margin requirements, enabling traders to deploy more capital in other trades. By optimizing margins, traders can significantly enhance their ROI while maintaining risk at manageable levels.

Let’s explore a streamlined approach to deploying and adjusting the ratio spread strategy using Opstra’s simulator. The strategy can be applied to various indices such as Nifty, Bank Nifty, and Fin Nifty, provided there is sufficient liquidity in both the selling and buying options. By utilizing Opstra’s simulator, we can analyze the potential profits and losses of deploying this strategy in past expiries, allowing us to evaluate its effectiveness.

Opstra’s simulator simplifies the process of deploying and adjusting the ratio spread strategy. Traders can access the simulator and choose the desired index, such as Bank Nifty, to evaluate the strategy’s performance. By analyzing the daily chart of the previous expiry, traders can assess the feasibility of implementing the ratio spread strategy.

Utilizing Opstra’s simulator, traders can simulate the ratio spread strategy on past expiries, such as the previous expiry (25th) and the current expiry (1st). This analysis provides insights into potential profits and losses, helping traders make informed decisions. It is crucial to ensure that sufficient liquidity is available in both the selling and buying options to execute the strategy effectively.

While the strategy can be successfully deployed in Nifty, Bank Nifty, and Fin Nifty, it is essential to consider the liquidity factor. These indices generally offer ample liquidity, making them ideal for implementing the ratio spread strategy. However, for other indices like Sensex, traders should exercise caution and evaluate the liquidity aspect before considering this strategy.

The concept remains consistent regardless of the specific time, year, or market conditions. By focusing on understanding the core concept, traders can effectively deploy this strategy on recent expiries like 1st June and 25th, as well as adapt it to their specific requirements.

To initiate the strategy, traders can navigate to the Bank Nifty section on their preferred platform. From there, access the expiry section and select the desired expiry date, such as the 25th. The strategy is designed to be executed on the same day, with the suggested starting time being 9:25 AM. By narrowing down the time window to two 5-minute candles, traders can efficiently execute their trades.

When creating the ratio spread strategy, traders can opt to add money or purchase options slightly out of the money. In the current market scenario, the premiums for these options are ranging around 130-140. Based on the market price, traders can choose an in-the-money, at-the-money, or out-of-the-money option strike. Let’s consider the example of an at-the-money strike, such as 43,600, with a premium of 129 rupees.

To facilitate easy calculations, it is recommended to execute the strategy with a trade size of 20 slots. This enables traders to simplify the ratio to either 1:4 or 1:5. By buying 20 slots, traders can effectively execute the ratio spread strategy and manage their positions accordingly.

We will continue our discussion on the ratio spread strategy, focusing on profit potential and risk mitigation. To illustrate this, we will consider the buying premium of 130 rupees.

In the ratio spread strategy, selling options helps offset the cost of buying options, reducing the overall risk exposure. By selling 25 or 26 times, traders can potentially increase their profit potential and enhance the risk-reward ratio. It’s important to note that this strategy is vega negative, meaning it benefits from the decay of time value (theta decay) as the expiration approaches.

When analyzing the chart, it’s evident that the strategy offers downside protection. As long as the market remains above a certain level (such as 44,000 in this case), there is no loss, ensuring a level of safety. Moreover, during periods of high wicks and increased volatility, the strategy tends to be more profitable, as it allows for larger profit zones.

When trading on expiry day, aiming for 3-4% returns may not be realistic. Instead, it’s essential to focus on the absolute value of profits. By consistently executing trades and targeting a profit margin of around 7-8 rupees per lot, traders can accumulate substantial gains. Accounting for brokerage costs, which typically amount to 1.5 rupees per lot, targeting a profit of 8 rupees per lot ensures a profitable outcome.

It’s important not to be swayed by YouTube videos showcasing enormous profits. Instead, consider the journey from smaller gains to significant wealth accumulation. By executing the strategy diligently and maintaining a long-term perspective, traders can gradually increase their absolute profits and grow their trading portfolio. Remember, consistency and disciplined execution is the key.

To boost ROI, we recommend buying options from a slight distance, around 3 or 4 rupees above the selling price. By doing so, traders can reduce their margin requirements and increase their ROI. For instance, if you were initially planning to spend 1 crore, this adjustment brings the margin down to 60 lakhs. Consequently, even a 0.7% profit on the reduced margin amounts to a substantial gain of 70,000 rupees.

While executing the ratio spread strategy, it’s crucial to assess the overall profit potential in terms of absolute value rather than fixating solely on percentage returns. By consistently deploying this strategy on expiry days, traders can accumulate significant profits over time. Additionally, incorporating hedging techniques provides a level of risk management and downside protection.

It’s important for traders to grasp the concept of hedging and how it impacts overall profit generation. By buying options at a distance and selling them at higher prices, traders can optimize their profit potential and enhance their ROI. This approach not only offers a higher probability of success but also reduces the margin requirements, allowing for greater flexibility and increased profitability.

To optimize ROI, we recommend buying options from a slight distance, around 3 or 4 rupees above the selling price. This adjustment allows traders to reduce their margin requirements significantly. For example, if initially planning to spend 1 crore, adjusting the trade brings the margin down to 60 lakhs. Consequently, even a 0.7% profit on the reduced margin can yield a substantial gain of 70,000 rupees.

When executing the ratio spread strategy, it is crucial to assess profit potential in terms of absolute value rather than focusing solely on percentage returns. By consistently deploying this strategy on expiry days, traders have the opportunity to accumulate significant profits over time. Additionally, incorporating hedging techniques provides a level of risk management and downside protection, ensuring a more balanced approach.

Traders must grasp the concept of hedging and its impact on overall profit generation. By buying options at a distance and selling them at higher prices, traders can optimize profit potential and enhance their ROI. This approach not only increases the probability of success but also reduces margin requirements, allowing for greater flexibility and increased profitability.