Understanding ITM Double straddle strategy

Risk management

Please refer to risk management guide before going through this guide, to understand the ITM Double straddle strategy behavior

Straddle Strategy

Straddle is buying call and put option of same strike price. For scalping, we use the same strategy with some modification for different scenario

Visual guide: strategy execution flow

Double Long and Hedge ReEnter

Diagram 1 shows, how we enter with x quantity, followed by compulsory hedge and then take another same x quantity and finally booking profit by squaring off

Diagram 2 is same strategy but this time we are in loss and to protect our capital, we quickly ReEnter our hedge

Double Long, ReEnter to single

Diagram 3 shows, we were in profit, but after exiting hedge and going double long, we incurred loss. We reduced risk to half, by exiting additional call and reentering put.

Double Long, Double Hedge and ReEntry Hedge

Diagram 4 shows, we went double long, but since we were sure of trend we decided to double hedge our long and will exit and renter hedge as required

Diagram 5 shows, we can change our strategy on the fly we can exit, ReEnter both single and double quantity be it call or put

More on, Default, ITM Double Straddle strategy

Full Double straddle strategy for scalping is shown below. You can adjust order and money part as per your preference only on request.
when you hit Enter ⏎, order is placed as per step number

[
  {
    "step": "1 & 3",
    "order": "buy call",
    "money": 100,
    "reenter": "yes*"
  },
  {
    "step": "2 & 3",
    "order": "buy put",
    "money": 100,
    "reenter": "yes*"
  },
  {
    "step": 4,
    "order": "to be decided",
    "money": 100,
    "reenter": "no"
  },
  {
    "step": 5,
    "order": "to be decided",
    "money": 100,
    "reenter": "yes"
  }
]

We have covered everything, but if you still want to deep dive in strategy order flow you can go through below steps

Let’s understand the full order flow. The pnl points show below not related to visual diagram above.

case 1: Option Buyer, Long strategy

we suggest that you open the terminal and type try@scalper.sh ⏎ while understanding this guide
By default, it will buy ITM strike at 100 points from spot.
Consider we are scalping with 1 lot, 15 quantity
Wherever you see ⏎, we are hitting Enter button to place next order

• ⏎ step 1 The 1’st order is buy call, 15 quantity
• ⏎ step 2 The 2’nd order is buy put, 15 quantity, the hedge part
• at this point a. we are 15 quantity call and 15 quantity put
• ⏎ step 3 The 3’rd order is to exit step 1 or step 2
  In this case we exit the hedge part, that is, we exit put
• ⏎ step 4 The 4’th order to be decided is now buy call
• at this point b. we are 30 quantity call (double long) and 0 quantity put
• we have two options from here
  • option 1 is to hedge (double long) by hitting Enter and execute step 5
  • option 2 is to go back at point a, by reentering step 2 or 1, In this case, we buy put(reenter), step 2 again
    • step 4, that is buy call gets auto exit and we do reenter
• ⏎ step 5 The last and 5’th order is the double hedge part for what we bought in step 4
  In this case we buy 30 quantity put
• at this point we are 30 quantity of call and 30 quantity of put
• we now have three options from here
  • square off close all our position
  • exit step 5 that is exit 30 quantity put and stay long with 30 quantity of call
    • we can always reenter this step
  • exit step 1 & 3 that is exit 30 quantity call and short with stay 30 quantity put
    • we can always reenter this step
• In this case we will stay Long and either square off or keep exit and reenter step 5(buy put) multiple times

case 2: Option buyers, Short strategy

This is the exact opposite of Long Strategy,

• Step 1 is buy put
• Step 2 is buy call, rest everything follows as it is

case 3: Create your own strategy

You are free to adjust order and money part on request only, but understand that scalper.sh is designed for fast scalping, hence the Default strategy is the way to go.

• you can design either Long or Short strategy
• you can then convert the same strategy from
  • Long to Short by pressing Shift+S
  • Short to Long by pressing Shift+L
  • what it does is, it flips orders
    • buy call becomes buy put
    • similarly, sell call becomes sell put
• always test your strategy in paper trade mode, before going live

The Idea

• Idea is straightforward, to scalp quickly and to stay properly hedged
• always take half the quantity in first order to minimize the risk
• hedge immediately with the next order in strategy
• then exit the hedge and go full quantity
• adjustment/risk management is important hence reenter, hedge if in doubt