November 22, 2019

DIS Short Put 45 DTE Cash-Secured Options Backtest

spintwig.com Options 45 DTE, backtest, Cash Secured, DIS, Early Management, Hold Till Expiration, Short Put 0

2 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)
All statistics are pre-tax, where applicable
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

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Worst Monthly Return

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Average P/L Per Day

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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

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Sharpe Ratio

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Profit Spent on Commission

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

Total P/L

DIS Short Put 45 DTE total profit and loss

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.