!pip install -q yfinance

import yfinance as yf
import pandas as pd
import numpy as np

# No broker account, no API key, no ServLoci setup needed for this chapter —
# yfinance reads public end-of-day data from Yahoo Finance. Indian tickers take
# an ".NS" suffix (NSE) or ".BO" (BSE); index tickers are prefixed with "^"
# (^NSEI = Nifty 50, ^BSESN = Sensex, ^GSPC = S&P 500).
NSE_TICKER = "RELIANCE.NS"
US_TICKER = "AAPL"
INDEX_TICKER = "^NSEI"

print("yfinance", yf.__version__)

data = yf.download(NSE_TICKER, period="3y", interval="1d", progress=False, auto_adjust=True, multi_level_index=False)
close = data["Close"]
returns = close.pct_change().dropna()
ann_return = float(returns.mean() * 252)
ann_vol = float(returns.std() * np.sqrt(252))
sharpe = ann_return / ann_vol if ann_vol else float("nan")
print(f"[1] {NSE_TICKER}: annualized return {ann_return:.1%}, volatility {ann_vol:.1%}, Sharpe {sharpe:.2f}")

info = yf.Ticker(NSE_TICKER).info
pe = info.get("trailingPE")
market_cap = info.get("marketCap")
# Crude sanity band, not investment advice — a filter to skip obviously broken
# or unpriceable names, not a ranking of good vs. bad companies.
passes_fundamentals = pe is not None and 0 < pe < 60
print(f"[2] {NSE_TICKER}: trailing P/E={pe}, market cap={market_cap}, passes basic sanity filter={passes_fundamentals}")

sma_fast = close.rolling(20).mean()
sma_slow = close.rolling(50).mean()
cross = (sma_fast > sma_slow).astype(int).diff().fillna(0)
forward_5d_return = close.shift(-5) / close - 1

golden_cross_days = cross[cross == 1].index
if len(golden_cross_days):
    edge = float(forward_5d_return.reindex(golden_cross_days).mean())
    print(f"[3] Golden-cross days: {len(golden_cross_days)}, avg forward 5-day return: {edge:.2%}")
else:
    print("[3] No golden-cross signals in this window — see notebook 27 before trusting any single signal.")

from scipy.stats import norm
import math

def bs_price(opt_type, spot, strike, t_years, vol, rate=0.065):
    if t_years <= 0 or vol <= 0:
        return max(spot - strike, 0) if opt_type == "CE" else max(strike - spot, 0)
    d1 = (math.log(spot / strike) + (rate + vol * vol / 2) * t_years) / (vol * math.sqrt(t_years))
    d2 = d1 - vol * math.sqrt(t_years)
    if opt_type == "CE":
        return spot * norm.cdf(d1) - strike * math.exp(-rate * t_years) * norm.cdf(d2)
    return strike * math.exp(-rate * t_years) * norm.cdf(-d2) - spot * norm.cdf(-d1)

spot = float(close.iloc[-1])
strike = round(spot / 50) * 50  # nearest 50-point strike, illustrative only
premium = bs_price("CE", spot, strike, t_years=7 / 365, vol=ann_vol)
print(f"[4] Illustrative ATM {strike} CE, 7 DTE, {ann_vol:.0%} vol -> Black-Scholes premium Rs.{premium:.2f}")

STT_SELL = 0.001            # simplified equity-delivery STT approximation — confirm current rate before sizing real capital
BROKERAGE_PER_TRADE = 20    # flat per-order brokerage, typical Indian discount-broker cap

split = int(len(close) * 0.7)
train, test = close.iloc[:split], close.iloc[split:]

def backtest_sma_crossover(prices, fast=20, slow=50, capital=100_000):
    sma_f = prices.rolling(fast).mean()
    sma_s = prices.rolling(slow).mean()
    position = (sma_f > sma_s).astype(int)
    daily_ret = prices.pct_change().fillna(0)
    strat_ret = position.shift(1).fillna(0) * daily_ret
    n_trades = int(position.diff().abs().fillna(0).sum())
    cost_drag = n_trades * (BROKERAGE_PER_TRADE / capital + STT_SELL)
    gross_return = float((1 + strat_ret).prod() - 1)
    return {"n_trades": n_trades, "gross_return": gross_return, "cost_drag": cost_drag, "net_return": gross_return - cost_drag}

train_result = backtest_sma_crossover(train)
test_result = backtest_sma_crossover(test)
print("[5] Train (in-sample): ", train_result)
print("[5] Test (out-of-sample):", test_result)

def position_size(capital, risk_pct, max_loss_per_share):
    if max_loss_per_share <= 0:
        return 0
    return max(int((capital * risk_pct) // max_loss_per_share), 0)

def guard_max_loss(strategy_max_loss, capital, hard_cap_pct=0.05):
    if abs(strategy_max_loss) > capital * hard_cap_pct:
        raise ValueError(f"strategy max loss {strategy_max_loss} exceeds hard cap {capital * hard_cap_pct}")
    return True

capital, risk_pct = 500_000, 0.02
assumed_max_loss_per_share = spot * 0.05  # illustrative 5% adverse-move assumption, not a stop-loss guarantee
qty = position_size(capital, risk_pct, assumed_max_loss_per_share)
guard_max_loss(qty * assumed_max_loss_per_share, capital)
print(f"[6] Risk-managed size for {NSE_TICKER}: {qty} shares, max assumed loss Rs.{qty * assumed_max_loss_per_share:,.0f}")

print("\n=== Decision chain summary ===")
print(f"Ticker:               {NSE_TICKER}")
print(f"Annualized Sharpe:     {sharpe:.2f}")
print(f"Fundamentals sanity:   {'PASS' if passes_fundamentals else 'FAIL'}")
print(f"Out-of-sample net ret: {test_result['net_return']:.2%} over {test_result['n_trades']} trades")
print(f"Risk-managed size:     {qty} shares (2% risk budget)")
print("Status:                PAPER / DRY-RUN ONLY — no live order placed")

Capstone: Build Your Own Strategy End to End¶

Setup — no broker account needed¶

The Stock Market School, end to end¶

From here to a live system — and why this stops short of one¶