SPX Straddle - 45 DTE - Manage Profits at 45%

In this post we look at the backtest results of selling a one-lot, at-the-money (ATM) straddle on the S&P 500 Index (SPX), initiated at 45 days-to-expiration (DTE).  In this fifth post of five on 45 DTE straddles, we look at trades that use the same loss exits as shown in the first post, and in addition, take profits at 45% of the credit received.  The results displayed in this post represent data from 816 individual trades entered by the automated backtester.

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 Straddle Series - P&L Exits.

In the trade metrics tables, some of the metrics rows have been highlighted 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 (P&L % / Trade - 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 the y-axis scale is the same in all of the 45 DTE equity curves.

No IV Rank Filter

In this section we will look at the results of entering one trade for every monthly expiration regardless of the implied volatility rank (IVR) of the SPX on the date of entry.  Entering these trades at 45 DTE and utilizing our loss exits and 45% credit exits (described here), resulted in the equity curves below.

(click to enlarge)

The trade metrics for these different exits are shown in the table below.  The (125:45) variation stood out with the best P&L % / day reading, highest overall P&L %, and the best win rate.  Several of these metrics were the same as other strategy variations.  The second place strategy was the (150:45) variation.

(click to enlarge)

The table below shows the distribution of returns in five-number summary format.  Hat-tip to tastytrade.

(click to enlarge)

Below are three sets of scatter plots for selling 45 DTE ATM SPX straddles. The first image contains one scatter plot per strategy and shows P&L in percentage terms versus IVR for the SPX. The IVR was captured on the day each trade was initiated.  At this level of profit taking it is difficult to distinguish the trend of increasing P&L with increasing IVR, but it is still evident.

(click to enlarge)

The next image shows P&L in percentage terms versus initial ATM IV. This ATM IV was captured on the day each trade was initiated.  Higher IV resulted in higher returns, but the majority of the profitable and unprofitable trades occurred at lower IV...below 30.  The lower win rate at the 45% profit taking level makes it difficult to see the trend, since there are nearly as many losing trades as winning trades.

(click to enlarge)

The third image shows P&L in percentage terms versus days-in-trade (DIT).  In order to extract 45% of the credit, the trade duration needs to be longer...this is clearly evident with the clustering of profitable trades above 25 DIT.  At the higher loss management levels, 125% and greater, most of the losses were realized at expiration.  This is the same pattern we noticed with the 38 DTE trades using the 45% win management level.

(click to enlarge)

IV Rank > 50% Filter

In this section we will look at the results of entering one trade for every monthly expiration only when the IVR of the SPX is greater than 50% ( >50% ).  Entering these trades at 45 DTE and utilizing our loss exits and 45% credit exits (described here) resulted in the equity curves below.

(click to enlarge)

The trade metrics for these different exits are shown in the table below.  As we've seen with the earlier articles, there are significantly fewer trades that meet the >50% IVR criteria.  The P&L% per day readings and win rates are much higher at the higher loss levels (125%, 150%, 175% and 200%).  We observed this pattern with the 10%, 25%, and 35% profit management also.

(click to enlarge)

The table below shows the distribution of returns in five-number summary format.

(click to enlarge)

IV Rank < 50% Filter

In this section we will look at the results of entering one trade for every monthly expiration only when the IVR of the SPX is less than 50% ( <50% ).  Entering these trades at 45 DTE and utilizing our loss exits and 45% credit exits (described here) resulted in the equity curves below.  These filtered trades have had a very good run all of 2015, an this trend was present in the 35% profit management level also.

(click to enlarge)

The trade metrics for these different exits are shown in the table below.  Using the lower IVR filter did not improve any of the metrics.

(click to enlarge)

The table below shows the distribution of returns in five-number summary format.

(click to enlarge)

In the next post I'll summarize the automated backtest results of the 45 DTE ATM SPX short straddles, before moving on to the 52 DTE straddle series.


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SPX Straddle - 45 DTE - Manage Profits at 35%

In this post we look at the backtest results of selling a one-lot, at-the-money (ATM) straddle on the S&P 500 Index (SPX), initiated at 45 days-to-expiration (DTE).  In this fourth post of five on 45 DTE straddles, we look at trades that use the same loss exits as shown in the first post, and in addition, take profits at 35% of the credit received.  The results displayed in this post represent data from 816 individual trades entered by the automated backtester.

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 Straddle Series - P&L Exits.

In the trade metrics tables, some of the metrics rows have been highlighted 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 (P&L % / Trade - 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 the y-axis scale is the same in all of the 45 DTE equity curves.

No IV Rank Filter

In this section we will look at the results of entering one trade for every monthly expiration regardless of the implied volatility rank (IVR) of the SPX on the date of entry.  Entering these trades at 45 DTE and utilizing our loss exits and 35% credit exits (described here), resulted in the equity curves below.

(click to enlarge)

The trade metrics for these different exits are shown in the table below.  The (125:35) and (150:35) variations stand out with solid P&L % / day readings, highest total P&L %, and the highest win rates.

(click to enlarge)

The table below shows the distribution of returns in five-number summary format.  Hat-tip to tastytrade.

(click to enlarge)

Below are three sets of scatter plots for selling 45 DTE ATM SPX straddles. The first image contains one scatter plot per strategy and shows P&L in percentage terms versus IVR for the SPX. The IVR was captured on the day each trade was initiated.  As we noticed in the prior articles, there is a clear trend of increasing P&L with increasing IVR.

(click to enlarge)

The next image shows P&L in percentage terms versus initial ATM IV. This ATM IV was captured on the day each trade was initiated.  Higher IV resulted in higher returns, but the majority of the profitable and unprofitable trades occurred at lower IV...below 35...the same pattern we noticed in the last post on managing profits at 25%.  We also see loss clustering between 10 and 20 IV at the higher loss management levels.  We noticed this pattern in the last post as well.

(click to enlarge)

The third image shows P&L in percentage terms versus days-in-trade (DIT).  We see the same two patterns that we observed in the prior articles...when managing losses early (25%,  50%), the losses were fairly evenly distributed across DIT.  As the loss management becomes less aggressive (125% and higher), we see that the losses are concentrated later in the trades.  Also, as we've seen in the other posts, most of these losses were not realized until expiration...meaning many of these particular losses were less than our loss threshold values.

(click to enlarge)

IV Rank > 50% Filter

In this section we will look at the results of entering one trade for every monthly expiration only when the IVR of the SPX is greater than 50% ( >50% ).  Entering these trades at 45 DTE and utilizing our loss exits and 35% credit exits (described here) resulted in the equity curves below.

(click to enlarge)

The trade metrics for these different exits are shown in the table below.  As we've seen with the earlier articles, there are significantly fewer trades that meet the >50% IVR criteria.  The best variations of the group have much higher P&L% per day readings.  We observed this pattern with the 10% and 25% profit management levels also.  The win rate is 86% for the top four variations, which all have higher loss management thresholds.

(click to enlarge)

The table below shows the distribution of returns in five-number summary format.

(click to enlarge)

IV Rank < 50% Filter

In this section we will look at the results of entering one trade for every monthly expiration only when the IVR of the SPX is less than 50% ( <50% ).  Entering these trades at 45 DTE and utilizing our loss exits and 35% credit exits (described here) resulted in the equity curves below.

(click to enlarge)

The trade metrics for these different exits are shown in the table below.  Using the lower IVR filter did not improve any of the metrics.

(click to enlarge)

The table below shows the distribution of returns in five-number summary format.

(click to enlarge)

In the next post we will look at the backtest results of 45 DTE ATM SPX short straddles using the same loss thresholds as above, but with profit taking occurring at 45% of the credit received.


Follow my blog by email, RSS feed or Twitter (@DTRTrading).  All options are available on the top of the right hand navigation column under the headings "Subscribe To RSS Feed", "Follow By Email", and "Twitter".

SPX Straddle - 45 DTE - Manage Profits at 25%

In this post we look at the backtest results of selling a one-lot, at-the-money (ATM) straddle on the S&P 500 Index (SPX), initiated at 45 days-to-expiration (DTE).  In this third post of five on 45 DTE straddles, we look at trades that use the same loss exits as shown in the first post, and in addition, take profits at 25% of the credit received.  The results displayed in this post represent data from 816 individual trades entered by the automated backtester.

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 Straddle Series - P&L Exits.

In the trade metrics tables, some of the metrics rows have been highlighted 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 (P&L % / Trade - 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 the y-axis scale is the same in all of the 45 DTE equity curves.


No IV Rank Filter

In this section we will look at the results of entering one trade for every monthly expiration regardless of the implied volatility rank (IVR) of the SPX on the date of entry.  Entering these trades at 45 DTE and utilizing our loss exits and 25% credit exits (described here), resulted in the equity curves below.

(click to enlarge)

The trade metrics for these different exits are shown in the table below.  The (125:25) and (150:25) variations stand out with the top P&L % / day readings, highest overall P&L % values, and the highest win rate.  These also happen to be the variations highlighted by Tastytrade.

(click to enlarge)

The table below shows the distribution of returns in five-number summary format.  Hat-tip to Tastytrade.

(click to enlarge)

Below are three sets of scatter plots for selling 45 DTE ATM SPX straddles. The first image contains one scatter plot per strategy and shows P&L in percentage terms versus IVR for the SPX. The IVR was captured on the day each trade was initiated.  The trend of increasing P&L with increasing IVR continues.

(click to enlarge)

The next image shows P&L in percentage terms versus initial ATM IV. This ATM IV was captured on the day each trade was initiated.  Higher IV resulted in higher returns, but the majority of the profitable trades occurred at an IV below 35.  It is also interesting to note that at the higher loss management levels (100 - 200) there is a cluster of losing trades in the IV range of 12 to 22...those particular losers should be investigated a bit further.

(click to enlarge)

The third image shows P&L in percentage terms versus days-in-trade (DIT).  We see the same two patterns that we observed before...when managing losses early (25%,  50%), the losses were fairly evenly distributed across DIT.  As the loss management becomes less aggressive (125% and higher), we see that the losses are concentrated above 25 DIT.   Also, most of these losses were not realized until expiration...meaning many of these particular losses were less than our threshold values.

(click to enlarge)

IV Rank > 50% Filter

In this section we will look at the results of entering one trade for every monthly expiration only when the IVR of the SPX is greater than 50% ( >50% ).  Entering these trades at 45 DTE and utilizing our loss exits and 25% credit exits (described here) resulted in the equity curves below.

(click to enlarge)

The trade metrics for these different exits are shown in the table below.  There are significantly fewer trades that meet the >50% IVR criteria...roughly 20% of the available trades...this is a consistent trend with the > 50% IVR filter.  The top four variations that meet this IVR criteria have high P&L% per day readings, and win rates of 86%.

(click to enlarge)

The table below shows the distribution of returns in five-number summary format.

(click to enlarge)

IV Rank < 50% Filter

In this section we will look at the results of entering one trade for every monthly expiration only when the IVR of the SPX is less than 50% ( <50% ).  Entering these trades at 45 DTE and utilizing our loss exits and 25% credit exits (described here) resulted in the equity curves below.

(click to enlarge)

The trade metrics for these different exits are shown in the table below.  Using the lower IVR filter did not improve any of the metrics over the IVR > 50% filtered other than the total P&L %.

(click to enlarge)

The table below shows the distribution of returns in five-number summary format.

(click to enlarge)

In the next post we will look at the backtest results of 45 DTE ATM SPX short straddles using the same loss thresholds as above, but with profit taking occurring at 35% of the credit received.


Follow my blog by email, RSS feed or Twitter (@DTRTrading).  All options are available on the top of the right hand navigation column under the headings "Subscribe To RSS Feed", "Follow By Email", and "Twitter".

SPX Straddle - 45 DTE - Manage Profits at 10%

In this post we look at the backtest results of selling a one-lot, at-the-money (ATM) straddle on the S&P 500 Index (SPX), initiated at 45 days-to-expiration (DTE).  In this second post of five on 45 DTE straddles, we look at trades that use the same loss exits as shown in the first post, and in addition, take profits at 10% of the credit received.  The results displayed in this post represent data from 816 individual trades entered by the automated backtester.

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 Straddle Series - P&L Exits.

In the trade metrics tables, some of the metrics rows have been highlighted 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 (P&L % / Trade - 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 the y-axis scale is the same in all of the 45 DTE equity curves.


No IV Rank Filter

In this section we will look at the results of entering one trade for every monthly expiration regardless of the implied volatility rank (IVR) of the SPX on the date of entry.  Entering these trades at 45 DTE and utilizing our loss exits and 10% credit exits (described here), resulted in the equity curves below.

(click to enlarge)

The trade metrics for these different exits are shown in the table below.  The (125:10) through (175:10) variations had the highest P&L % / day readings, highest overall P&L % values, and the highest win rate.  These three variations had identical trade metrics.

(click to enlarge)

The table below shows the distribution of returns in five-number summary format.  Hat-tip to tastytrade.

(click to enlarge)

Below are three sets of scatter plots for selling 45 DTE ATM SPX straddles. The first image contains one scatter plot per strategy and shows P&L in percentage terms versus IVR for the SPX. The IVR was captured on the day each trade was initiated.  There is a clear trend of increasing P&L with increasing IVR...a trend that has repeated across all of the tests.

(click to enlarge)

The next image shows P&L in percentage terms versus initial ATM IV. This ATM IV was captured on the day each trade was initiated.  Higher IV resulted in higher returns, but the majority of the profitable trades occurred at lower IV, below 35.

(click to enlarge)

The third image shows P&L in percentage terms versus days-in-trade (DIT).  When managing losses early (25%,  50%), the losses were fairly evenly distributed across DIT.  As the loss management becomes less aggressive (125%, 150%, 175%, and 200%), the loss thresholds were only hit once.  We still had losing trades, with losses realized at expiration...but these losses were mostly less than our threshold value at expiration.

(click to enlarge)

IV Rank > 50% Filter

In this section we will look at the results of entering one trade for every monthly expiration only when the IVR of the SPX is greater than 50% ( >50% ).  Entering these trades at 45 DTE and utilizing our loss exits and 10% credit exits (described here) resulted in the equity curves below.

(click to enlarge)

The trade metrics for these different exits are shown in the table below.  There are significantly fewer trades that meet the >50% IVR criteria, but the P&L% per day readings and win rates are higher than the non-IVR filtered trades.  The higher loss management levels perform the best with this high-IVR filter.

(click to enlarge)

The table below shows the distribution of returns in five-number summary format.

(click to enlarge)

IV Rank < 50% Filter

In this section we will look at the results of entering one trade for every monthly expiration only when the IVRof the SPX is less than 50% ( <50% ).  Entering these trades at 45 DTE and utilizing our loss exits and 10% credit exits (described here) resulted in the equity curves below.

(click to enlarge)

The trade metrics for these different exits are shown in the table below.  Using the lower IVR filter did not improve any of the metrics over the non-IVR filtered or IVR > 50% filtered variations.

(click to enlarge)

The table below shows the distribution of returns in five-number summary format.

(click to enlarge)

In the next post we will look at the backtest results of 45 DTE ATM SPX short straddles using the same loss thresholds as above, but with profit taking occurring at 25% of the credit received.


Follow my blog by email, RSS feed or Twitter (@DTRTrading).  All options are available on the top of the right hand navigation column under the headings "Subscribe To RSS Feed", "Follow By Email", and "Twitter".

SPX Straddle - 45 DTE - No Profit Management

This post looks at the results of selling a one-lot straddle on the S&P 500 Index (SPX), initiated at 45 days-to-expiration (DTE).  This is the first post of five on 45 DTE straddles, and will only look at loss exits...the other four posts will explore different profit exits on top of the loss exits in this post.  The results displayed in this post represent data from 816 individual trades entered by the automated backtester.

For background on the setup for the automated backtests, as well as the nomenclature used in the charts and tables below, please see the introductory article for this series: Option Straddle Series - P&L Exits.

In the trade metrics tables, some of the metrics rows have been highlighted 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 (P&L % / Trade - 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 the y-axis scale is the same in all of the 45 DTE equity curves.


No IV Rank Filter

In this section we will look at the results of entering one trade for every monthly expiration regardless of the implied volatility rank (IVR) of the SPX on the date of entry.  Entering these trades at 45 DTE and utilizing our loss exits (described here) resulted in the equity curves below.

(click to enlarge)

The trade metrics for these different exits are shown in the table below.  The win rates are not great.  This is due to the lack of profit based exits.  These equity curves look very similar to the non-profit-managed 38 DTE trades.  These trades are either exited at expiration OR at the designated loss level.

(click to enlarge)

The table below shows the distribution of returns in five-number summary format.  Hat-tip to tastytrade.

(click to enlarge)

Below are two images of scatter plots for selling 45 DTE ATM SPX straddles. The first image contains one scatter plot per strategy and shows P&L in percentage terms versus IVR for the SPX. The IVR was captured on the day each trade was initiated.

(click to enlarge)

The next image shows P&L in percentage terms versus initial ATM IV. This ATM IV was captured on the day each trade was initiated.

(click to enlarge)

Neither of the scatter plot images give us any great insight with these particular straddle variations; variations that only manage losses, not profits.



IV Rank > 50% Filter

In this section we will look at the results of entering one trade for every monthly expiration only when the IVR of the SPX is greater than 50% ( >50% ).  Entering these trades at 45 DTE and utilizing our loss exits (described here) resulted in the equity curves below.  The curves have long periods that are flat...these are times when no trades were taken due to the IVR being below the filter level.

(click to enlarge)

The trade metrics for these different exits are shown in the table below.  These trades have better win rates and significantly better returns per day than the non-IVR filtered trades.  Only about 20% of the trades satisfied the IVR filter of  > 50%.

(click to enlarge)

The table below shows the distribution of returns in five-number summary format.

(click to enlarge)

IV Rank < 50% Filter

In this section we will look at the results of entering one trade for every monthly expiration only when the IVR of the SPX is less than 50% ( <50% ).  Entering these trades at 45 DTE and utilizing our loss exits (described here) resulted in the equity curves below.

(click to enlarge)

The trade metrics for these different exits are shown in the table below.  These trades have lower win rates and lower total P&L numbers than the non-IVR and IVR > 50% filtered trades shown above.

(click to enlarge)

The table below shows the distribution of returns in five-number summary format.

(click to enlarge)

This post contains the foundational content needed for comparison with the four upcoming 45 DTE blog posts.  Because of this, we did not learn too much about how the 45 DTE SPX short straddles perform other than the IV rank filter had a positive impact on trade results.

In the next post we will look at the automated backtest results of 45 DTE SPX short straddles using the same loss thresholds as above, but with profit taking occurring at 10% of the credit received.


Follow my blog by email, RSS feed or Twitter (@DTRTrading).  All options are available on the top of the right hand navigation column under the headings "Subscribe To RSS Feed", "Follow By Email", and "Twitter". 

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