DIS Short Put 45 DTE Cash-Secured Options Backtest

4 min read

In this post we’ll take a look at the backtest results of opening one DIS short put 45 DTE cash-secured position each trading day from Jan 3 2007 through November 8 2019 and see if there are any discernible trends. We’ll also explore the profitable strategies to see if any outperform buy-and-hold DIS.

There are 10 backtests in this study evaluating over 30,100 DIS short put 45 DTE cash-secured trades.

Let’s dive in!

Summary

Systematically opening cash-secured short put positions on DIS was profitable across all strategies.

None of the cash-secured DIS short put 45 DTE strategies outperformed buy-and-hold DIS with regard to total return.

Methodology

Strategy Details

• Symbol: DIS
• Strategy: Short Put
• Days Till Expiration: 45 DTE +/- 17, closest to 45
• Start Date: 2007-01-03
• End Date: 2019-11-08
• Positions opened per trade: 1
• Entry Days: daily
• Entry Signal: N/A
• Timing: 3:46pm 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

Assumptions

• 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

Mechanics

• 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

Results

Win Rate

Managing trades early lowered the win rate for all strategies.

Baring the 5D and 10D early management strategies which suffered from a disproportionally large commission drag, the higher the delta the trade the lower the win rate.

Annual Volatility

Worst Monthly Return

Average P/L Per Day

Average Trade Duration

Managing trades at 50% max profit or 21 DTE yielded trade durations less than half the duration of hold-till-expiration.

Compound Annual Growth Rate

Sharpe Ratio

Profit Spent on Commission

16.9% – the blended average percent of profits spent on commission across strategies.

Total P/L

Higher delta strategies yielded greater total return than lower delta strategies.

Holding till expiration yielded greater total return than managing early.

Overall

All option strategies were profitable.

Discussion

Early management hurt performance across the board. Yes, daily P/L is higher as a result of the much shorter trade durations. However, that’s more than offset by every other metric. This is a scenario where the best approach historically has been to simply open a position then walk away.

Additional Resources

Custom Backtests

Have your ideas professionally backtested.

• trades ideas remain confidential
• backtest results remain unpublished
• deliverables include:
  • a master-results spreadsheet
  • raw trade logs and data sources
• most custom research is completed within 5 business days

Contact me for a quote.

Trade Logs

Visit the trade log store to download the trade logs associated with this and other published studies.