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!
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 with regard to total return.
- Symbol: AAPL
- Strategy: Short Put
- Days Till Expiration: 45 DTE +/- 17, closest to 45
- Start Date: 2007-01-03
- End Date: 2019-08-30
- Positions opened per trade: 1
- Entry Days: daily
- Entry Signal: N/A
- 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
- 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 lowered the win rate.
The higher the delta the lower the win rate. 5D was an exception due to commission drag.
Worst Monthly Return
Average P/L Per Day
Average Trade Duration
Managing trades at 50% max profit or 21 DTE yielded average trade durations less than half those of holding till expiration.
Higher-delta positions took longer to reach profit targets than lower-delta positions.
Compound Annual Growth Rate
Profit Spent on Commission
10.98% – the blended average percent of profits spent on commission across all short put strategies.
Early management outperformed holding till expiration with regard to total return. 5D and 10D were exceptions.
The higher the delta the higher the total return.
All short put strategies were profitable.
AAPL is one of the largest companies, as measured by market cap, in the S&P 500 at the time of writing. It’s no surprise the strong performance of AAPL left the 45 DTE option strategies in the dust. Of course, hindsight is 20/20.
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.
Update: the AAPL short put 0-DTE Cash Secured study is now available.
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