In this post we’ll take a look at the backtest results of opening one AAPL short put 45 DTE cash-secured position each trading day from January 3 2007 through August 30 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 31,700 AAPL short put 45 DTE cash-secured trades.
Let’s dive in!
- Symbol AAPL
- Strategy Short Put
- Start Date 2007-01-03
- End Date 2019-08-30
- 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 21 DTE, whichever occurs first
- Hold till expiration
- 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
This study seeks to measure the performance of opening short put positions and will interpret the results from the lens of income generation relative to buy-and-hold AAPL.
The utility of the short put strategy as a portfolio hedging tool or other use will not be discussed and is out of scope.
Managing trades early lowered the win rate.
The riskier the trade the lower the win rate. The 5D early management strategy suffers a bit due to commission drag.
Worst Monthly Return
Average P/L Per Day
Average Trade Duration
Managing trades at 50% max profit or 21 DTE improved the efficiency of capital.
Riskier trades took longer to reach profit targets.
Compound Annual Growth Rate
Profit Spent on Commission
10.98% – the blended average percent of profits spent on commission across all short put strategies.
Higher delta strategies yielded more profit than lower delta strategies.
All short put strategies were dwarfed by the strong performance of AAPL.
AAPL is one of the largest companies, as measured by market cap, in the S&P 500. It’s no surprise the strong performance of AAPL left the 45 DTE option strategies in the dust.
By implementing an early management mechanic we were able to “cycle” capital much faster than a hold-till-expiration approach. By implementing shorter-dated strategies, such as 2-DTE options, it may be possible to capture more of the upside despite the additional gamma and whipsaw risks inherent with short-duration trades.
Systematically opening short put positions on AAPL was profitable no matter which strategy was selected.
All AAPL short put strategies underperformed buy-and-hold AAPL both on a total return and risk-adjusted basis.
The 16D @ hold-till-expiraiton AAPL short put strategy and 30D @ 50D max profit or 21 DTE tied for having the greatest risk-adjusted return among option strategies.
Thanks for reading 🙂
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