The above is the result of back test of SPY using delta neutral strategy.
- Weekly option open on Monday
- Premium collected around $0.15
- Close on the last day market close
- Loss is calculated base on the different of the 1 SD and closing price
- Strategy used is Delta neutral (Strangle or IC with $2 wide spread )
- The 17 trades resulted in a net loss
- Undefined risk or wide spread protection will result in higher loss
- Winrate 82% but the 3 trades loss can wipe out the profit
- Commission will result in a bigger loss
Even with stop loss for every trade or use 1 SD IC with maximum $1 loss spread will result in a loss and the commission will wipe out that profit. This option system is not workable in long run.