Performance Summary

This algorithmic trading strategy, named "Wave-Return Credit Spread Overnight," aims to identify and capitalize on short-term volatility and directional biases in the NIFTY 50 index. The core methodology involves analyzing a combination of implied volatility (IV) surface dynamics, realized volatility divergence, market unpredictability derived from regression analysis, and market stress assessed through Hamiltonian features, as well as several option greeks. These components are combined to create a raw alpha signal, which is then normalized using a time-series rank (ts_rank) function. The normalized alpha, along with measures of IV spread and slope across different strikes of calls and puts, is used to identify opportunities to establish credit spread positions by trading on the call and put side of the option chain. The algorithm specifically focuses on trading credit spreads, either a credit put spread or a credit call spread, based on the calculated alpha signals and implied volatility conditions. A credit spread is an options strategy designed to profit from a limited range of price movement in the underlying asset. The algo looks for opportunities when the market anticipates the price of NIFTY50 to move within a narrow range. This approach benefits from time decay, where the value of the options diminishes as they approach their expiration date, allowing the trader to profit if the underlying asset remains within the expected range. The trading conditions check and identify favorable entry points when IV surfaces are agitated, there is divergence between IV and Realized Volatility, IV slope direction confirms the signals and market unpredictability, and stress are high.