Backtesting
Monday, September 9th 2019
Sell Put Spread When VIX Spikes, Exit Based on Max Profit
Backtest a short put spread with entry rules like VIX price and percent of max profit and exit based on stop loss and OTM%.
Summary
This article describes a two week SPY short put spread strategy that involves selling a put spread with 30 delta / 15 delta, selling it when VIX spikes, exiting if 80% of max profit is achieved or if the loss equals to max profit, and rolling into a new short put spread if the stock price is at short price. The article provides screenshots of the backtester to illustrate the strategy and includes a link to the backtest.
We received a question from one of our customers asking how to set up the following two week SPY short put spread strategy in our backtester.
- Sell a put spread with 30 delta / 15 delta
- Sell price is 15% of max potential price
- Sell it when VIX spikes
- Exit if 80% of max profit is achieved
- Exit if the loss equals to max profit
- Roll into new short put spread if the stock price is at short price
Sell a put spread with 30 delta / 15 delta looks like this in the backtester:
Sell price is 15% of max potential price: The max price potential is the difference between strikes. Here's how this looks in the backtester, note that for a credit spread the percentages are negative:
Sell it when VIX spikes: We will consider a VIX spike as the price of the VIX going up at least 10% over the last week price. Here's what this looks like in the backtester:
Exit if 80% of max profit is achieved:
Exit if the loss equals to max profit: The max profit here is 80% (exit point) minus 15% (entry point) or 65% so we will enter a stop loss as below:
Roll into new short put spread if the stock price is at short price: We will use Exit Leg on Strike Trigger where we exit when the long put otm%>=1:
Here is a link to the backtest above. You need to be logged into Wheel. You can get a free trial here.
More reading HERE.
Disclaimer:
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