In this post we’ll take a look at the backtest results of opening one VZ 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 VZ.
There are 10 backtests in this study evaluating over 30,600 VZ short put 45 DTE cash-secured trades.
Let’s dive in!
Systematically opening cash-secured short put positions on VZ was profitable for all option strategies.
All cash-secured VZ short put strategies underperformed buy-and-hold VZ with regard to total return.
- Symbol: VZ
- 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
- 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)
- 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
Managing trades early lowered the win rate for all strategies.
The higher the delta lower the win rate. The 5D early-management strategy 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 trade durations less than half the duration of hold-till-expiration.
Compound Annual Growth Rate
Profit Spent on Commission
16.33% – the blended average profit spent on commission across all option strategies.
Holding till expiration yielded greater total return vs early management.
The greater the delta the greater the total return.
All of the option strategies were profitable.
VZ has a similar risk and return profile to T. This makes sense as they’re both large, established communications companies. At the time of writing they are the #1 and #2 largest wireless carrier by subscriber count, respectively, in the US.
When we compare the two, option strategy performance is nearly identical. The material difference between the two underlying is the buy-and-hold total return. VZ was the stronger performer.
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