THE SETUP
Going into Friday's expiry, India VIX was sitting at 13.4 — relatively calm but with a slight upward bias over the week. Nifty had held the 23,500 support zone across three consecutive sessions, which gave us confidence in a structured Bull Put Spread entry.
The thesis was simple: Nifty would either hold 23,500 or make a shallow recovery toward 23,800 before expiry. We didn't need a big move — just a hold.
WHY THIS SPREAD
Risk / Reward
Maximum profit if Nifty closes above 23,800 at expiry. Maximum loss capped at the width of the spread minus credit received. The reward-to-risk ratio on this trade was 1.8:1 — well above our minimum threshold of 1.5:1 before we enter any spread.
VIX Context
With VIX below 15, option premiums were relatively compressed. This is exactly the environment where selling premium through spreads works best — you collect credit without overpaying for the long leg protection.
Support Confirmation
Three consecutive closes above 23,500 gave us structural confirmation. Our system flagged this pattern with a 72% historical accuracy of holding into expiry when VIX is sub-15.
HOW IT PLAYED OUT
Nifty opened flat at 23,650 and drifted higher through the session, closing at 23,780. The 23,800 PE expired worthless, the 23,300 PE expired worthless, and we retained the full credit of ₹96.30 per unit across 650 lots — a net P&L of +₹12,090 after brokerage.
Total return on the ₹10L capital base: +1.21% in a single trading day.
WHAT WE LEARNED
This trade reinforced a core principle of our system — patience at entry is more valuable than speed. We had flagged this setup two days earlier but waited for the third support confirmation before executing. Jumping in on day one would have exposed us to additional intraday volatility without improving the expected value.
The algo held discipline where a discretionary trader might have second-guessed the entry or exited early on the Thursday dip to 23,510.