Nightcrawler: Futures and Options (F&O) Trading Strategy

Meet Nightcrawler, a trading model that leverages overnight positions to take advantage of opening gaps in the NIFTY50 index.

In this post, we'll delve into the key features and benefits of Nightcrawler, providing insights on how it can complement your existing strategies.

What is Nightcrawler?

Nightcrawler is a high-volatility, long-only trading model that utilises a market anomaly strategy. It recommends buying a NIFTY Futures contract at market close and selling it the next day at open. This model is based on the concept that buying NIFTY50 at close and selling at open is more profitable than buying at open and selling at close.

How does it work?

The Nightcrawler model takes advantage of the opening gaps that occur in the NIFTY50 index. It uses a proprietary algorithm to identify the best times to enter and exit trades based on market conditions. The reasons why this phenomenon occurs are not well understood, but researchers have dubbed it the "grandmother of all market anomalies."

Is Nightcrawler suitable for me?

Nightcrawler is suitable for active traders who are comfortable with a high degree of activity and can pledge their primary investments for margin requirements. This model requires sufficient capital and active involvement, as it involves trading in futures.

Note: Please note that the model is based on the analysis of overnight market movements and may carry a higher level of risk compared to traditional day trading strategies. The model is based on a proprietary algorithm that identifies potential investments based on overnight market movements and news events. Additionally, it is important to note that the model's universe is limited to NIFTY50, so it may not be as diversified as other models.

Keep in mind that the Nightcrawler model requires constant monitoring of overnight market conditions and news events and you should be prepared to act quickly on signals provided by the model.

It is important to consult with a financial advisor before committing to this strategy and to carefully consider the suitability of this model based on your investment objectives, financial situation, and risk tolerance.

Model performance

Returns on this model are calculated on the contract value of the index futures product.

*Backtest period for Performance Metrics is Jan' 2011 to Aug' 2022.

Returns calculated on index contract value; calendar days in all day metrics; returns include slippages; model has a regime filter.

Frequently Asked Questions:

How is Nightcrawler different from other trading models?

Nightcrawler is based on a market anomaly strategy and recommends buying a NIFTY Futures contract at market close and selling it the next day at open.

What are the chances of success with Nightcrawler?

Nightcrawler works best in trending markets.

Please note that the model does not work in range-bound or downtrend markets, during which the model does not emit any signals.

What is the minimum capital requirement?

The minimum capital requirement for Nightcrawler is ₹1,10,000.

How often do I need to act on signals?

It is recommended that you act on 2 signals per day.

How long should I subscribe for?

A minimum period of 1 year is recommended for optimal results.

Final thoughts

Nightcrawler is a unique trading model that allows you to take advantage of opening gaps in the NIFTY50 index. Its market anomaly strategy is based on the idea that buying NIFTY50 at close and selling at open is more profitable than buying at open and selling at close. This model is suitable for active traders who are comfortable with a high degree of activity and can pledge their primary investments for margin requirements.

It's worth noting that the overnight effect is observed globally across stocks and indices, but in some markets trading costs make the strategy unfeasible.

Disclaimer: The information provided in this post is for general informational purposes only. It should not be considered as financial or investment advice. Please conduct your own research and consult with a financial advisor before making any investment decisions.

Past performance is not indicative of future results and all investments involve risk.

The authors and the company they represent do not guarantee any specific outcome or profit.