Guides › Short straddle

Backtest a short straddle the way you would trade it

A short straddle sells the at-the-money call and put together. It earns when the index stays near the strike and loses when it runs. Small changes, like the entry time or where the stop sits, change the result a lot, which is why it is worth testing each one.

What to vary

Run the same straddle with one change at a time and compare the runs:

  • Entry time: 9:20, 9:30, 10:00 or later in the day
  • Stop loss per leg: 20%, 25%, 30% or a fixed number of points
  • Move the other leg's stop to cost once one leg is stopped out
  • Re-enter after a stop loss, once or more
  • An overall stop and target for the whole position, and for the day

Read the result honestly

A straddle often wins most days and gives a lot back on a few. Look at the largest loss, the longest drawdown and how many months were negative, not only the total. The monthly heatmap and the drawdown chart make that easy.

Charges matter on a strategy with four orders a day. The net profit line shows the result after brokerage, STT, exchange fees, stamp duty and GST.

Questions

What is the best stop loss for a short straddle?

There is no single answer; it depends on the index, the entry time and the period. Test several and compare them on the Compare page. A backtest replays past prices. It shows how a rule would have done, not how it will do, and trading can lose money.

Can I add hedges?

Yes. Add bought out-of-the-money legs to turn it into an iron fly or a hedged straddle, and the margin and charges change with it.

Related guides

  • Backtest the 9:20 straddle: Backtest the 9:20 short straddle on minute data: ATM call and put sold at 9:20 with a stop loss per leg. See every trade, the drawdown and the net profit.
  • Backtest an iron condor: Backtest iron condors on NIFTY, BANKNIFTY and SENSEX. Choose wings by distance or premium, add stop losses and adjustments, and see the result after charges.
  • Test option selling before you risk money on it: Test option selling strategies on NIFTY, BANKNIFTY, SENSEX and stock options before you risk money: straddles, strangles, spreads, condors and re-entries.
  • Backtest NIFTY option strategies on minute data: Backtest NIFTY weekly and monthly option strategies on 1-minute data from 2019. Straddles, strangles, spreads and condors with stop losses, re-entries and charges.

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