In this post we’ll take a look at the backtest results of opening one AAPL short put 0 DTE cash-secured position each trading day from Jan 3 2007 through Dec 27 2019 and see if there are any discernible trends. We’ll also explore the profitable strategies to see if any outperform buy-and-hold AAPL.
There are 10 backtests in this study evaluating over 12,900 AAPL short put 0 DTE cash-secured trades.
Let’s dive in!
Systematically opening ultra-short-duration short put positions on AAPL was profitable most of the time.
All AAPL short put strategies underperformed buy-and-hold AAPL with regard to total return.
- Symbol: AAPL
- Strategy: Short Put
- Days Till Expiration: 0 DTE +/- 3, closest to 0
- Start Date: 2007-01-03
- End Date: 2019-12-27
- Positions opened 1
- Entry Days every trading day
- Timing 3:46 ET
- Strike Selection
- 5 delta +/- 4.5 delta, closest to 5
- 10 delta +/- 5 delta, closest to 10
- 16 delta +/- 6 delta, closest to 16
- 30 delta +/- 8 delta, closest to 30
- 50 delta +/- 8 delta, closest to 50
- Trade Entry
- 5D short put
- 10D short put
- 16D short put
- 30D short put
- 50D short put
- Trade Exit
- 50% max profit or expiration, whichever occurs first
- Hold till expiration
- Max Margin Utilization Target (short option strats only): 20% | 1x leverage
- Max Drawdown Target: 99% | account value shall not go negative
- Margin requirements are always satisfied
- Margin calls never occur
- Margin requirement for short CALL and PUT positions is 20% of notional
- Margin requirement for short STRADDLE and STRANGLE positions is 20% of the larger strike
- Margin requirement for short VERTICAL SPREAD positions is the difference between the strikes
- Early assignment never occurs
- Prices are in USD
- Prices are nominal (not adjusted for inflation)
- Margin collateral is held as cash and earns no interest
- Assignment P/L is calculated by closing the ITM position at 3:46pm ET the day of expiration / position exit
- Commission to open, close early, or expire ITM is 1.00 USD per contract
- Commission to expire worthless is 0.00 USD per contract
- Commission to open or close non-option positions, if applicable, is 0.00 USD
- Slippage is calculated according to the slippage table
- For comprehensive details, visit the methodology page
Managing trades early outperformed holding till expiration with regard to win rate. 5D is an exception due to commission drag.
The higher the delta the lower the win rate.
Worst Monthly Return
Average P/L Per Day
Average Trade Duration
Managing trades at 50% max profit improved the efficiency of capital and shortened the average trade duration.
Time in Market
Not depicted in the chart and table above, the majority of the time spent out of the market was between January 3 2007 through June 3 2010. June 4 2010 is when weekly options on AAPL were introduced.
Compound Annual Growth Rate
Profit Spent on Commission
20.84% – the blended average percent of profits spent on commission across all profitable short put strategies.
Early management underperformed holding till expiration with regard to total P/L. 50D was an exception.
There were no clear relationships between delta and total P/L.
All cash-secured short put strategies were dwarfed by the strong performance of buy/hold AAPL.
The combination of order-entry mechanics and available CBOE options products (monthlies until June 3 2010 then weeklies from June 4 2010 onward) caused the strategy to experience:
- ~57% of time in the market
- material amounts of timing luck
As highlighted in the methodology section, the “ultra short” 0 DTE strategy calls for options with 0-3 DTE horizons. 0 DTE would equate to a position opened and expiring same day whereas a 3 DTE position would equate to a position opened on Friday and closed on a Monday (Fri = 0 DTE, Sat = 1, Sun = 2, Mon = 3).
AAPL, unlike SPY, does not have Monday-expiring or Wednesday-expiring options. Therefore, positions are opened Tues (3 DTE), Wed (2 DTE), Thurs (1 DTE) and Fri (0 DTE) so long as a delta exists in the respective range.
As luck would have it – timing luck is becoming a theme – most of AAPL’s gains over this period occurred between Friday morning and Monday morning, precisely when the option strategy didn’t have market exposure.
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