15.5 Playbook 5: a week of Nifty weekly options (expiry 3 November 2026)

15.5.1Prerequisites and what this playbook teaches#

Read first (essential) M08 · 8.7–8.9 (Black-76 and the Greeks), M09 · 9.7 (strangles and condors), 9.8 (expiry-day gamma) and 9.9 (negative skew of option selling and its sizing), M09A · 9A.2, 9A.7, 9A.12 (margins and SEBI's dated rules), 9A.13 (adjustments as new trades, Proposition 9A.13) and 9A.15 (weekly expiries and SEBI's loss data).

For depth: M09A · 9A.6 (pinning near expiry) and M14 · 14.14 (why a Greek expansion misstates a short-gamma book's loss in a large move).

The playbook teaches how a short-volatility position is opened, converted to defined risk, adjusted by a rule and carried to expiry, with each day's P&L explained by its Greeks and each day's margin computed.

15.5.2The setup as testable rules#

1. Cycle. Trade the weekly Nifty expiry that follows a monthly expiry. Open at the close of the first session after the monthly expiry.
2. Strikes. Short call at the smallest multiple of 50 at or above $F(1 + \sigma\sqrt\tau)$, short put at the largest multiple of 50 at or below $F(1 - \sigma\sqrt\tau)$, with $F$ the parity forward and $\sigma$ the ATM IV of the target expiry from that close (contracts with non-zero volume only). These are roughly one-standard-deviation strikes, about 0.15 delta.
3. Conversion. At the next close, buy wings 200 points beyond each short strike, turning the strangle into an iron condor. The reason is written into the rules: never carry naked short options over a weekend, and cut the margin.
4. Adjustment. At any close, if the short leg on either side has |delta| above 0.40, close that side (the short and its wing). Do not roll, do not add to the other side (Proposition 9A.13: adjust only into a position you would open fresh).
5. Expiry. Hold what remains to cash settlement.
6. Size. One lot (65 units, bhavcopy NewBrdLotQty). The condor's maximum loss sets $1R$; it must be at most ₹10,000. For the one night as a strangle, the stress loss is the relevant measure (M03 · 3.9).
7. Greeks and margins each day: Black-76 with each leg's own IV; the SPAN-like scenario margin of M09A (9A.17) with the illustrative parameters of m09a_margin_greeks (scan 6%, vol shift 4 points, extreme moves at 35% weight) plus exposure margin of 2% of the notional of short legs, and an extra 2% on expiry day (SEBI circular SEBI/HO/MRD/TPD-1/P/CIR/2024/132, from 20 Nov 2024). These model margins are for comparison between positions; the exchange's actual figures differ.

15.5.3The scan and the episode#

The rule picks the most recent completed cycle at the time of writing: the monthly expiry of Tuesday 27 Oct 2026 was followed by the weekly expiry of Tuesday 3 Nov 2026 (the 28 Oct bhavcopy lists Nifty option expiries 3 Nov, 9 Nov, 17 Nov and 23 Nov). The trade opens at the 28 Oct close. Data: NSE F&O bhavcopies for 28, 29 and 30 Oct and 2 and 3 Nov 2026; India VIX from Yahoo.

At the 28 Oct close: Nifty 22,698.85; parity forward 22,707.41; ATM (22,700) IV 15.34%; ATM straddle 356.10; six calendar days to expiry. One standard deviation is $22{,}707.41 \times 0.1534 \times \sqrt{6/365} = 446.6$ points, so the short call is at the first strike above 23,154.0, 23,200, and the short put at the first strike below 22,260.8, 22,250.

15.5.4The plan before entry#

Thesis. Index implied volatility on average exceeds subsequent realised volatility (the variance risk premium, M09 · 9.4). Selling one-standard-deviation strikes collects it, with a negatively skewed payoff (M09 · 9.9). The edge, if any, is small and the tail is large; the rules exist to bound the tail.

Day 0, the strangle. Sell the 23,200 call at 25.70 (IV 14.41%, delta 0.125; 10.2 lakh contracts traded) and the 22,250 put at 42.85 (IV 16.54%, delta −0.166). Credit 68.55 points, ₹4,455.75 per lot. Model margin: scenario ₹55,172 plus exposure ₹59,039, total ₹1,14,211. Stress: a 10% overnight fall would put the 22,250 put about 1,820 points in the money, a loss of roughly ₹1.15 lakh, 11.5% of capital. This is why the position is converted the next day.

Day 1, the condor. Wings at 23,400 and 22,050. Expected net credit about 50 points, maximum loss about ₹9,750: inside the 1% limit.

Break-even win rate. A condor with net credit $k$ and width $w$ wins at most $k$ and loses at most $w - k$. If outcomes were only full win or full loss, the break-even win rate would be $(w-k)/w = 75\%$ for $k = 50$, $w = 200$, before costs. The short strikes' deltas (0.125 and 0.166) put each side's risk-neutral chance of finishing in the money at roughly 12% and 17%, so the market's own probability of the full win is about 70%; the trade's expectancy is the variance premium net of costs, which M09A's 31-expiry sample suggests is positive but cannot establish.

15.5.5Day-by-day management#

Position and decisions

Close	Nifty	Forward	ATM IV	India VIX	Leg prices (delta of shorts)	Action
Wed 28 Oct	22,698.85	22,707.4	15.34%	16.25	C23200 25.70 (0.125); P22250 42.85 (−0.166)	Sold the strangle, credit 68.55
Thu 29 Oct	22,936.75	22,972.4	12.99%	15.12	C23200 47.25 (0.246); P22250 9.40 (−0.050); C23400 12.95; P22050 5.55	Bought the wings for 18.50. Condor net credit 50.05; max loss ₹9,746.75; break-evens 22,199.95 / 23,250.05
Fri 30 Oct	23,053.10	23,026.6	11.98%	15.30	C23200 46.00 (0.270); P22250 5.65; C23400 12.15; P22050 3.85	Call delta below 0.40: hold over the weekend, defined risk
Mon 2 Nov	23,440.80	23,329.4	15.51%	15.50	C23200 158.60 (0.749); C23400 46.35; P22250 2.00; P22050 1.60	Call delta above 0.40: closed the call spread for 112.25
Tue 3 Nov (expiry)	23,810.85	—	—	15.72	Put spread expires worthless at settlement 23,810.85	Done

Greeks, P&L and margin per lot (Greeks after the day's trades; delta in index units, gamma per point², vega in ₹ per IV point, theta in ₹ per calendar day; margins from the model of rule 7).

Close	Position	Mark-to-market ₹	Day P&L ₹	Delta	Gamma	Vega	Theta	Scenario margin	Exposure margin	Total
28 Oct	strangle	−4,456	—	+2.7	−0.0654	−860	+1,107	55,172	59,039	1,14,211
29 Oct	condor	−2,480	+774	−8.8	−0.0356	−332	+459	10,570	59,728	70,298
30 Oct	condor	−2,317	+162	−10.7	−0.0424	−293	+482	10,683	59,869	70,552
2 Nov	put spread	−26	−5,005	+0.2	−0.0013	−6	+26	12,169	30,328	42,497
3 Nov	none	0	+26	—	—	—	—	—	—	—

On the morning of 3 Nov, the extra 2% exposure margin on short index options on expiry day applies to the remaining short put: the model total rises to ₹72,826 for a 200-point put spread (maximum payoff against you ₹13,000) whose value was ₹26.

P&L attribution (Greeks of each leg at the start of the period, applied to that period's change in forward $\Delta F$, elapsed calendar days and each leg's IV change):

Period	$\Delta F$	Actual ₹	Delta	Gamma	Theta	Vega	Residual
28→29 Oct	+265.0	+774	+713	−2,296	+1,107	+820	+429
29→30 Oct	+54.2	+162	−476	−52	+459	+264	−33
30 Oct→2 Nov	+302.8	−5,005	−3,241	−1,946	+1,447	−1,754	+490
2→3 Nov	+481.5	+26	+99	−155	+26	0	+56

Read the third row. Over the weekend and Monday the index rose 1.7% to close above the short call. The position was short delta (the condor's call side) and short gamma, and IV rose on a rally (the 23,200 call's IV went from 11.6% to 15.9% as it moved into the money with one day left). Three days of theta, ₹1,447, paid for less than a third of the delta and gamma loss. The first row shows the opposite: a 265-point rally lost ₹2,296 to gamma, but IV fell by 2.3 points and the position earned ₹820 of vega and ₹1,107 of theta.

A data caution for 2 Nov The parity forward from the closing option prices was 23,329.4, 111 points below the index close of 23,440.80, on an option with one day left. Futures closing prices in the bhavcopy are half-hour averages (M07 · 7.3, practitioner notes), and the option closing prices behave the same way here, while the index close comes from the closing auction. On a day the index rallied into the close, the options' "close" is stale relative to the index. The delta of 0.749 is therefore conservative, and the 112.25 paid for the call spread is a closing average, not a price one could have hit at 15:30.

15.5.6Exit and result#

Trade	Points
28 Oct: sold C23200 at 25.70 and P22250 at 42.85	+68.55
29 Oct: bought C23400 at 12.95 and P22050 at 5.55	−18.50
2 Nov: bought back C23200 at 158.60, sold C23400 at 46.35	−112.25
3 Nov: P22250 and P22050 expire out of the money	0
Net, points × 65	−62.20 × 65 = −₹4,043.00

Costs: six orders (₹120 brokerage), STT ₹11.20 (0.15% of premium sold), transaction charges ₹6.74, GST ₹22.82, stamp and SEBI fee ₹0.37: ₹161.13. Net −₹4,204.13 = −0.431R (R = the condor's maximum loss, ₹9,746.75), or −3.7% of the peak model margin. Tax: a non-speculative business loss (M01 · 1.8).

15.5.7Post-mortem#

The week. The Nifty rose 4.90% in four sessions, 3.12 times the ATM straddle of 28 Oct. If the straddle were the mean absolute move of a normal distribution (Proposition 9A.6), a move this large would have probability $2\Phi(-3.12\sqrt{2/\pi}) = 1.3\%$; with fat tails it is more likely than that, and it happened in the first cycle this playbook looked at.

The rules did their work. The counterfactuals, all per lot and before costs:

Version	Result
Naked strangle held to expiry	$(68.55 - 610.85) \times 65 = -\text{₹}35{,}249.50$ (−3.5% of capital, −3.6R)
Condor held to expiry with no adjustment	−₹9,746.75 (the full −1R)
Strangle with the same delta rule, no wings	$(68.55 - 158.60) \times 65 = -\text{₹}5{,}853.25$
Condor with the delta rule (the trade)	−₹4,043.00

The conversion cost 18.50 points of premium but capped the weekend tail and cut model margin by ₹44,000. The adjustment closed the losing side at 112.25 against a settlement value of 200. Neither rule is shown to add value by one week; they were chosen to bound the loss, and they did. Note what the adjustment was not: it did not roll the call up, and it did not sell more puts to "collect back" the loss. Proposition 9A.13 says either would have been a new short-volatility trade on a rallying index.

Margin and return. The strangle needed about ₹1.14 lakh of model margin for a ₹4,456 credit, 3.9%; the condor about ₹70,000 for ₹3,253 of net credit. SEBI's expiry-day exposure margin makes the last day expensive to carry: here it more than doubled the margin of a position worth ₹26.

What the statistics say. SEBI's FY26 study (M01 · 1.11 Case 1) found 87.7% of individual F&O traders lost money, most of them option buyers; sellers were about 2% of individuals. M09A's sample of 31 expiries found the realised move averaged 84% of the day-before straddle ($t = -1.44$ for a buyer's loss). If a weekly condor's true edge were $0.1R$ with $s = 1R$, M03 (3.2b) needs 808 weeks, 15.5 years, for 80% power. One week, and one losing week, settles nothing either way; the useful output of this playbook is the daily attribution and margin table, which you can now build for any week.

15.5.8Do it in the simulator#

1. After the next monthly expiry, download the bhavcopy at the first session's close. Compute $F$, the ATM IV and the one-standard-deviation strikes for the next weekly expiry (^NSEI as the underlying).
2. In Simulator → New order, enter the strangle legs at the closing prices (or, if the simulator does not support options, record them in the thesis of a zero-size ^NSEI trade). Next day, add the wings.
3. Every evening, from the new bhavcopy, compute the legs' IVs, deltas, the attribution table and the model margin. Apply the 0.40-delta rule mechanically. After expiry, compare your attribution total with the realised P&L and explain the residual.

See it live: the Nifty 50 level and India VIX at https://oicharts.com/indices through the week; the chain itself you rebuild from the bhavcopy, as above.