NIFTY Momentum Signals for Long Call and Put Options

Summary

This project describes a directional index options strategy that uses NIFTY daily candles and 15-day simple moving averages of highs and lows to generate long call or put signals. Entry rules combine the current candle’s position relative to the averages with the prior day’s candle color and position. Positions are sized as a fraction of account balance, use at-the-money or out-of-the-money strikes, and exit at preset profit or loss thresholds, on moving-average conditions, or at expiry. The model holds one position at a time and includes brokerage and taxes.

The authors backtested daily index, futures, and options data spanning 2007–2017, optimizing parameters on earlier periods and evaluating later data. They report 600% return over ten years from 119 trades and describe protection during several market declines, alongside missed rallies and drawdowns. The results are specific to the historical sample and chosen settings; early exits and option time decay are identified as practical weaknesses, and the project calls for further improvement.

Key ideas

• The strategy derives directional option entries from NIFTY candle color and 15-day high and low moving averages.
• It buys calls or puts and uses preset profit targets, stop losses, and moving-average exit conditions.
• Position size is limited by a predefined share of account balance, with only one open position at a time.
• The historical backtest reports strong cumulative returns but also missed rallies and periods of drawdown.
• Option time decay and early exits are noted as limits of the approach.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.