RUT Strangle - High Loss Threshold - 59 DTE

This post reviews the backtest results of selling one-lot options strangles on the Russell 2000 Index (RUT), initiated at 59 days-to-expiration (DTE).  The results in this post were derived from 2312 individual trades entered by the backtester.  The results are grouped by the delta of the short strikes.  For example, a 4 delta strangle is constructed by selling a -4 delta put, and selling a +4 delta call.

For background on the setup for the backtests, as well as the nomenclature used in the charts and tables below, please see the introductory article for this series: Option Strangle Series - Higher Loss Thresholds

In the trade metrics tables, I have highlighted the rows to indicate values that are in the upper half of the readings.  One of the metrics to note is the average P&L per day in percentage terms (Trade Details (%) - Avg. P&L / Day).  This is a measure of the P&L per day normalized to the maximum initial portfolio margin (initial PM) required for that trade run...it tells us the effectiveness of theta with respect to our margin requirement.

Also note, that all of the blog posts for the RUT strangle series have equity curves with identical y-axis scales, unless otherwise noted.

4 Delta Short Strikes

(click to enlarge)

(click to enlarge)

For the 59 DTE, 4 delta RUT short strangles, the top exit approaches indicated by the metrics were the: 300:50 and 100:50 variations.  The highest return occurred with the 200:75 exit, but it's other metrics were lower.


6 Delta Short Strikes

(click to enlarge)

(click to enlarge)

For the 59 DTE, 6 delta RUT short strangles, the top exit approaches indicated by the metrics were again the: 300:50 and 100:50 variations.  The 200:75 variation looked better at this short strike delta than with 4 delta short strikes.


8 Delta Short Strikes

(click to enlarge)

(click to enlarge)

For the 59 DTE, 8 delta RUT short strangles, the top exit approaches indicated by the metrics were the: 300:50, ExOut 200:50, and 200:50 variations.

With the 59 DTE tests, the highest average P&L per day readings occurred with the 8 delta short strike variations, with an average of 0.19% per day.  The highest overall P&L per day reading occurred with the 8 delta 300:50 and ExOut 200:50 variations, at 0.22% per day. In the next post we will look at these same deltas and exits, but on the RUT 66 DTE short strangle.


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