QuantInsti

Intraday Short Straddle Strategy Backtest in Python | Bank Nifty Options Strategy

The video walks through a Python back‑test of an intraday short straddle on Bank Nifty options, illustrating how to build, execute, and evaluate the trade from data ingestion to equity‑curve visualization. The author explains that selling at‑the‑money calls and puts creates a delta‑neutral, short‑gamma, short‑vega, long‑theta position. Entry is fixed at 9:20 am after the first five minutes of price discovery, exit at 3:15 pm, with no stop‑loss. Using one‑minute option data for the first quarter of 2022, the back‑test on 60 trading days generated roughly 869 points of profit and a maximum drawdown of about 40 points. Key code steps include converting date strings to datetime, rounding the underlying price to the nearest 100‑point strike, isolating the ATM strike, and computing minute‑by‑minute P&L by subtracting the entry premium from the prevailing premium. The plotted equity curve shows frequent small gains and occasional sharp drops, confirming the characteristic negative‑skew return profile of short‑volatility strategies. The results suggest the short straddle can be profitable in low‑volatility, range‑bound sessions, but the tail risk from volatility spikes and the omission of transaction costs mean traders must apply strict risk controls before deploying the approach live.