This post is to explain a BNF option selling strategy which can be followed on weekly expiry options for directional optional selling and higher returns when compared to traditional option selling.
The following rules should be applied on the slack alerts that are generated in the #bnfweeklyoi channel of OIAnalytics slack workspace.
Rule Number 1: Ignore alerts with price > Rs.1000
Rule Number 2: Check the alerts every 10 minutes during market hours and immediately execute the trade with hedge after the alert only around the entry price specified in the alert.
Rule Number 3: Add a hedge at the strike which covers the premium of sold strike. i.e. if you sold a strike of 35000CE at 500 based on the alert then you will add a hedge of buy in 35500CE because the premium collected is Rs.500.
Rule Number 4: Keep an initial stoploss of 90-100 points on the spread this is only for the day of entry as until the direction is established BNF can give some spikes.
Rule Number 5: After the entry and move in your favour can hold the position based on 15 min heiken Ashi candle close above/below the BNF futures price which was traded at the time of entry alert based on CE/PE sell. This is the condition for trade invalidation.
You can use other profit trailing methods based on your risk profile to book profits early but you have to exit the trade as per the rule number 5
Trade Log is maintained here for your reference.