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  1. Charles Pye
    January 29, 2023 @ 3:36 pm

    Pretty impressive results! I’m curious, have you ever gotten someone else to independently audit your results?


      January 29, 2023 @ 7:23 pm

      Informally, yes. A few examples:

      Dr. Karsten, CFA (BigERN) has allowed several guest posts. The raw data was provided with the content so he could generate the return series. No concerns were raised.

      A client commissioned, and authorized publication of, a study that was based on prior work that quant researcher Corey Hoffstein had published. Corey’s methodology in that study uses theoretical pricing, while the methodology here at spintwig is purely empirical. The results were comparable. This particular example could be considered a “reverse audit”; backtest results were similar to an independent and unaffiliated researcher.

      Less formally, when spintwig was just getting started, posts were made to a few sub Reddits (r/options, r/thetagang, etc.) which helped facilitate conversation and critique of the results and methodology. Each reddit post essentially became a micro dissertation. Most of the Reddit posts have since been taken down but a few remain. General improvements and clarifications were made throughout 2019 and at this point everything has been largely consistent. The methodology page outlines how calculations are derived, why backtest start dates are what they are, and related details. In 2023 a public version history has been introduced to provide visibility for any changes.

      Over the years, readers have downloaded trade logs. No concerns have been raised to date.

      Hope this helps!


      • Charles Pye
        January 30, 2023 @ 1:30 am

        Thanks! I appreciate the detailed response.


  2. Pratap Prabhu
    February 22, 2023 @ 8:36 am

    Wow fantastic! Selling options on S1=true is even more compelling when underlying treasuries give 5%


      February 23, 2023 @ 8:05 pm

      At a 1x leverage implementation (eg: 20% margin utilization at Reg-T margining), the collateral that’s held in treasuries compensates for the reduced premium received due to Rho’s effect on option pricing. A cash-secured implementation should generally be agnostic to the risk-free rate.

      At anything in excess of 1x leverage, there is an implied interest expense.

      Margin might be “free” to use in the sense that a trader doesn’t receive a bill from the broker to use it, but it’s still a form of leverage / borrowed funds and thus has an interest expense baked in. This “baked in” cost is in the form of receiving less premium.

      The average margin utilization on the s1 = true configuration was less than 1x, so that was a small tailwind. Meanwhile, s1 = false and daily entry averaged around 3-4x leverage. Implied interest was less of a drag early in the year but became a greater influence as the risk-free rate started to get in the 300-400bps range.


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