I am tweaking the strategy somewhat. These are the changes.
i) Earlier I would have a 10 point band, with flip over from both sides. Say the band was 23000 and 23010. As long as BN was withing the band, no problem. Let us say BN crosses upper level of 23010. I would buy BN. This would put me long 1BN. If it again crosses 23010 and returns within the band, I would take no action. Only when it crosses the lower level (23000) and goes to the other side, I would sell 2 BN, and my position would be short 1 BN. Now, if it crosses the upper level of 23010, I would buy 2 BN and my position would be long 1 BN. In effect, I lost 10 points either way. Bobbing would kill me.
ii) Now I am changing my strategy. The band is 40 points wide, say 22980 (Lower Level) and 23020 (upper level). As long as I am in band, do nothing. Say it crosses upper level of 23020 and goes above. Then I buy 1BN. Now say it returns back to the band. When it drops to 23010 (ie upper level minus 10), I sell 1 BN and my position is zero. If it crosses 23020 again, I buy 1 BN. If it re-enters the band and reaches 23010 (Upper Level - 10), I sell 1BN again and am in zero position. Only when it crosses the lower level of 22980 will I sell one more BN and be 1BN short. Say there is a reversal, and BN rises. I will buy 1BN at 22990 (lower level + 10) and come to zero position. I will buy one more BN at upper level of 23020.
This will not stop bobbing, but will reduce my bobbing cost by half as I am paying penalty only one way.
iii) The band itself is moving. Say the band is 22980 (Lower Level) and 23020 (upper level). Now we are in the band and cross the upper level. This means we buy 1BN. Now say it crosses 23010 (upper level - 10). We sell that 1 BN and have zero position. But the BAND HAS NOW SHIFTED UP by 10. We now consider the band as 22990 (lower level) and 23030 (upper level). Every time we pay a penalty we shift the band - upward if penalty is paid on upper side, downward if paid on lower side.
iv) Rather than selling 1 call and 1 put at ATM, I will sell 2 Calls at ATM + 200, 2 Puts at ATM - 200
That is all for now.
Your comments will be appreciated.