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Algo Trader| ICT FX Trader | AUM : 5Cr | Finding Possibilities in Uncertainties
Mumbai
Joined January 2013
Kept the analysis simple and straightforward Open to feedback or if there’s a better way I could’ve structured or tested it, I’d love to hear your thoughts. @SarangSood @PRAFULKULKARN18 @kirubaakaran @GoldenDustbin @iarjuntandon
I wanted to do a per-unit comparison to get a clearer picture of the negative impact if we’re forced to trade only monthly expiries. On a pure per-day basis, With weekly: Avg 59 points decay each day, With monthly: Avg drops to 27 points/day (Less than Half 😃 ) (9/12)
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I’m not suggesting that ' if ' weeklies disappear, the monthly Premium pattern will remain same as per my above Results or you'll turn non-profitable but tests were conducted mainly to get somewhat a rough idea of the potential impact. 🫳 (12) End Of the Thread
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Impact Summary: •Consistent weekly income →Gone •Systems relying on daily decay (short vols strats)→ Heavily affected •Theta curve shifts from linear→ exponential decay bunches up at the end •Volatility adjustments, Charges & Equity Curve of Systems -all take a hit . (11)
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Trading on Higher Premiums mean Higher Costs, So this kind of drop means there’s very little room for strategies that rely purely on theta. It becomes especially challenging to navigate thru volatility during the first half of the month. (10)
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I wanted to do a per-unit comparison to get a clearer picture of the negative impact if we’re forced to trade only monthly expiries. On a pure per-day basis, With weekly: Avg 59 points decay each day, With monthly: Avg drops to 27 points/day (Less than Half 😃 ) (9/12)
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but With Monthlies: -The first two weeks show much lower decay (Just 15 points Avg). -10 DTE (With 11 sample counts) have Negative Decay lol -Only near expiry decay pick up substantially -Last week clearly Lifts the Average of Monthly Decay Cycle (8)
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Final Average Results: With Weeklies - We see aroundd 35 Points Avg Decay (Per Day) for Non-0Dte's. -Expiry Day sees a Huge Jump Ofcourse - 126 Points (Per Day Avg Decay Points ) which supports selling weekly cycles well. but.. (7)
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Below are the month-by-month reports showing how weekly and monthly expiries performed side by side (check red text in ss for decay points). Note : Tests used 09:16 AM start & 3:29 PM end each day with decay measured using synthetic futures) Aug'24 - Sep'24 -Oct'24 - Nov'24 : (4)
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I analyzed 250 trading sessions and calculated the average straddle decay (in points & % terms) across all DTEs(Days to Expiry) Below are the month-by-month reports showing how weekly and monthly expiries performed side by side (check red txt in screenshots for decay points) (3)
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Each week’s straddle offers a new cycle of premium buildup → decay → expiry. If we lose weeklies , there’s only one expiry per month. That massively impacts how decay behaves daily, which is critical for strategies relying on theta. (2)
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Thread 🧵: If SEBI actually removes weekly expiries, what would it mean for options sellers like us? So I ran a full year Tests on NIFTY data in Python over the weekend to compare how premium decay differs between weekly and monthly "Expiry" straddles (1/12)
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