Safest Option Trading Hedging Strategy with 180 Days of Proof

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Welcome to this in-depth guide on the "Safest Option Trading Hedging Strategy with 180 Days of Proof" – a dual-expiry options trading approach designed to profit in both bullish and bearish markets. This strategy combines monthly ATM put options with weekly OTM call spreads to create a "hedged" portfolio. In this video, we’ll break down the strategy step-by-step, analyze 6 months of backtested results.
Monthly Expiry Component
• Buy an ATM Put Option: Purchase a put option at the current market level (ATM) at the start of the month.
• Sell a Put Option 1000 Points OTM: Sell a put option 1,000 points below the ATM strike.
Example: If the Nifty is at 23,500 at 9:30 AM on the first trading day of the month, you’d:
• Buy the 23,500 PE (Put).
• Sell the 22,500 PE (1,000 points OTM).
This position is held until the monthly expiry unless a significant profit prompts an early exit.
Weekly Expiry Component
• Buy a Call Option 300 Points OTM: Each week, buy a call option 300 points above the current ATM strike.
• Sell a Call Option 500 Points OTM: Sell a call option 500 points above the current ATM strike.
Example: If the Nifty ATM is 23,500 at 9:30 AM on Monday:
• Buy the 23,800 CE (300 points OTM).
• Sell the 24,000 CE (500 points OTM).
This position is entered every week and held until the weekly expiry.
Why It’s a Hedging Strategy
The brilliance of this strategy lies in its hedging mechanism:
• Market Goes Up: The weekly call spreads (buy 300 OTM, sell 500 OTM) profit as the Nifty rises, capitalizing on bullish momentum.
• Market Goes Down: The monthly put spread (buy ATM, sell 1,000 OTM) gains value as the Nifty falls, protecting against bearish moves.
By running both components simultaneously, you’re covered in both directions—hence the "safest" label. The approximate margin requirement is ₹90,000, making it accessible yet potent.

Let’s walk through a live example to solidify your understanding.
Setting Up the Positions
• Date: First trading day of the month, 9:30 AM.
• Nifty ATM: 23,500.
• Quantities: 75 (1 lot of Nifty, as defined in this strategy).
• Margin: ~₹90,000.
Monthly Position:
• Buy 23,500 PE.
• Sell 22,500 PE.
Weekly Position (Week 1):
• Buy 23,800 CE (23,500 + 300).
• Sell 24,000 CE (23,500 + 500).
Each subsequent week, adjust the weekly strikes based on the new ATM at 9:30 AM Monday.

Analyzed 6 months of data to calculate net returns. Below are the results:
1. March 2024
• Monthly Trade: 23,500 PE Buy + 22,500 PE Sell → Loss: ₹15,858
• Weekly Trades:
○ Week 1: 23,800 CE Buy + 24,000 CE Sell → Loss: ₹1,987
○ Week 2: 22,350 CE Buy + 22,850 CE Sell → Loss: ₹2,602
○ Week 3: 22,800 CE Buy + 23,000 CE Sell → Profit: ₹11,437
○ Week 4: 23,350 CE Buy + 23,550 CE Sell → Profit: ₹9,393
• Net March Profit: ₹383
2. February 2024
• Monthly Trade: 23,350 PE Buy + 22,350 PE Sell → Profit: ₹37,038
• Weekly Trades: Net Loss: ₹11,409
• Net February Profit: ₹25,629
3. January 2024
• Monthly Trade: 23,850 PE Buy + 22,850 PE Sell → Profit: ₹31,706
• Weekly Trades: Net Loss: ₹12,429
• Net January Profit: ₹19,277
4. December 2023
• Monthly Trade: 24,050 PE Buy + 23,050 PE Sell → Loss: ₹847
• Weekly Trades: Net Loss: ₹7,533
• Net December Loss: ₹8,380
5. November 2023
• Monthly Trade: 24,250 PE Buy + 23,250 PE Sell → Profit: ₹28,436
• Weekly Trades: Net Loss: ₹7,871
• Net November Loss: ₹8,718
6. October 2023
• Monthly Trade: 26,250 PE Buy + 25,250 PE Sell → Profit: ₹41,013
• Weekly Trades: Net Loss: ₹4,432
Net October Profit: ₹36,581

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*Disclaimer : Disclaimer: The information provided in this video is for educational purposes only and should not be considered as investment advice or a recommendation to buy or sell any securities.

The author, Dipak Das, is certified by SEBI NiSM and NSE F&O, but is not a SEBI registered investment advisor. The views expressed in this video are personal opinions and do not represent the views of any other entity.

Investing in the stock market, including options trading, involves substantial risk and potential for loss. You should always do your own research and consider seeking advice from a qualified investment advisor before making any investment decisions.

The author and the YouTube channel 'Stockan' shall not be held liable for any losses, financial or otherwise, incurred due to the use of the information provided in this video.

By watching this video, you agree to these terms and conditions. This video is intended for an audience in India and is in compliance with Indian laws and regulations.

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