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  1. Paul Snyder
    July 28, 2023 @ 11:33 am

    The bid/ask spread on 7DTE 90Delta VIX calls is pretty brutal.
    Right now the Aug2 13 Calls are $1.18/$1.59.
    The Aug9 12.5 Calls are $2.00/$2/39.

    Is that factored into the model in any manner?


      July 28, 2023 @ 11:44 am


      For single-leg backtests, the slippage is calculated as the 75% rank of the bid-ask spread in the market maker’s favor.

      Using your 2 bid / 2.39 ask example, sell price would backtest as 2.39 – ( 2.39 – 2 ) * 0.75 = 2.0975 or 209.75 USD premium received. A 50% rank would be considered the midpoint. The assumptions assume a less-than-optimal fill, on every trade, for the full duration of the backtest.

      More details at:


      • Paul Snyder
        July 28, 2023 @ 12:06 pm

        Great explanation. Thank you!


  2. Pratap
    July 28, 2023 @ 1:35 pm

    Selling calls are high risk because during a black swan event (outside of historical stats) you’ll get blown out.


      July 28, 2023 @ 1:50 pm

      This is indeed a high-risk strategy.

      The “unlimited loss” characteristic is evident in the average margin utilization value. The strategy needed an average margin utilization of under 5% just to stay solvent. However, it was quite profitable, too.

      One idea (not trading or legal advice!): allocate funds to a margin account titled in an LLC. Ensure the broker doesn’t require a personal guarantee on the margin account (can confirm Schwab offers non-personal-guarantee PM accounts). Maintain a much higher average margin utilization while aggressively taking profits / making distributions. When the strat eventually blows up, the margin account is zeroed or negative. Liquidate the LLC and repeat; the starting capital in the LLC is the “cost” to run the strat and ideally would have been paid for multiples over by the profits. Sequence of returns risk is really the greatest risk.

      TLDR: run the strat at elevated margin utilization rates and take profits aggressively while using an LLC structure as a functional long put for black swan events.


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