Back Testing Weekly Option on SPY

backtest SPY

The above is the result of back test of SPY using delta neutral strategy.

Assumptions

  1. Weekly option open on Monday
  2. Premium collected around $0.15
  3. Close on the last day market close
  4. Loss is calculated base on the different of the 1 SD and closing price
  5. Strategy used is Delta neutral (Strangle or IC with $2 wide spread )

Observation

  1. The 17 trades resulted in a net loss
  2. Undefined risk or wide spread protection will result in higher loss
  3. Winrate 82% but the 3 trades loss can wipe out the profit
  4. Commission will result in a bigger loss

Conclusion

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.

 

 

The importance of ISP

SH

Green ISP had been giving me lots of problem recently, it render me unable to put in option’s order or even close existing orders. Contacted both TOS and Green ISP and both finger point to each other’s infrastructure.

TOS

Decided to change ISP during the recent IT Show in Singapore 16-19 Mar 2017 and chose Orange ISP company after evaluating the price, performance, track record and feedback from other Option traders.

M1

Next month I will crossover to the Orange ISP.