Performance of strip option strategy on the Indian capital market

Abstract

The aim of this study is to analyse the performance of two different strip option strategies are analysed on the Indian stock market index, Nifty. The strategies on the data ranges from 2007-2020 on monthly bases. Long and short strip option strategies have been used in this analysis. By using newly developed pay-off formulas for strip option strategies, the results have been analysed on the basis of monthly success rate and profitability (in terms of points earned or lost in Nifty). Results of the higher success rate and better profitability of short strip option strategy indicate that volatility of Nifty has less bullish than bearish behaviour and Nifty has range-bound characteristics. Because of the higher success rate and better profitability, short strip option strategy can be consistently applied by traders on the Nifty for profit generation. For any trader, these findings will be useful for trading in Nifty. The pay-off formulas of strip option strategies have never been reported in any literature, hence these pay-off formulas will also help the academicians to calculate and understand the profit/loss on any index.