How to backtest a NIFTY options strategy — a real short straddle, start to finish

“At 09:20, sell the at-the-money NIFTY call and put of the nearest weekly expiry. If NIFTY stays in a range, both premiums shrink and I keep the difference. If the combined loss reaches ₹2,000, exit both. Otherwise exit at 15:10.”

This is a short straddle — one of the most common intraday options ideas in India. It earns when the market is quiet and loses when it moves sharply in either direction.

Each part of the idea becomes one node:

• Strategy setup — NIFTY options, 1-minute candles
• Entry signal — time is 09:20 or later
• Entry — sell 1 lot ATM CE, nearest weekly expiry
• Entry — sell 1 lot ATM PE, same expiry
• Exit signal — total P&L at or below −₹2,000, OR time is 15:10
• Exit — close both legs together
• Square-off — closes anything still open 5 minutes before the market closes

The ATM strike is picked from the contracts listed at 09:20 each day, and “nearest weekly” follows the real expiry calendar — so the same strategy works every week without editing. See the options strategy builder for every strike and expiry choice.

• Period: 20 Jul 2026 – 19 Oct 2026 (64 trading days)
• Data: tick-level NIFTY options prices — the stop is checked on every price change
• Size: 1 lot (65 quantity) per leg, 128 trades in total
• Fills: at the market price at that moment; slippage not added
• Charges: brokerage ₹20 per order, STT, exchange charge, SEBI fee, stamp duty and GST at current NSE rates

The edge was smaller than the costs. Before charges the strategy made +₹1,359. Brokerage alone was ₹5,120 — 256 orders at ₹20 each. With one lot, a flat per-order fee is a big share of a small profit. More profit days than loss days (36 vs 28) did not help, because the loss days were bigger.

A stop is not an exact price. The ₹2,000 stop was hit on 25 days, but the exits landed between −₹2,005 and −₹2,366: the stop is checked on each price change, and on fast days the price jumps past the level before the exit fills. Live trading behaves the same way, often with extra slippage.

Three months is one market mood. A quiet or a trending quarter can flip this result. Before trusting any strategy, backtest it over a longer period and different market phases — TradeLayout has NIFTY options data from January 2024.

What to try next, each a small change on the canvas: a wider stop, entering later, skipping expiry day with a days-to-expiry check, or more lots so the flat brokerage is a smaller share.

A backtest tells you how the idea did in the past. Paper trading runs the very same strategy on today's live prices with no real money, so you can watch entries, stops and exits as they happen. Only after that would you connect a broker and go live — see paper and live trading.