90 DTE Microsoft Bull Put Spreads (MSFT Strategy)

08 August 2023
strategy,
active

This is an option selling strategy of Microsoft (MSFT) I found via backtests on optionalpha.com.

Based on the backtests (approx 10 years), returns easily outperforms S&P500, as well as underlying MSFT stock (depending on allocation amount).

Best of all, it has extremely high win rate (> 95%).

There are a many variations of the strategy based on frequency, allocation amount, spread size, profit taking etc. I'm going to try a couple variations for now:

Basic overview #

Every week sell a 90 day to expiry (DTE) put credit spread on MSFT at .15/.10 delta.
Every month sell 90 DTE put credit spread on MSFT at .15/.05 delta

Detailed Overview #

There's not much more to it than that, other than how much money I want to allocate to this, and when to exit the position.

Basically, I have to be a robot and sell put spreads every week and month. I would just use Option Alpha's autotrading bots, but it doesn't work with Interactive Brokers yet.

Entry rules #

Every Monday or Tuesday, sell a 90DTE put spread (0.15 / 0.10 delta).
Every 15th to 20th of the month, sell a 90DTE put spread (0.15 / 0.05 delta)

Note: Doesn't have to be exactly 90 days. Can be a bit less or more (i.e. 80 to 100+).

Exit rules #

Take profit at 50% of initial collected premium.

Note: May experiment with percentage a bit

Allocation amount #

For now, I'm going to allocate just around $5,000 towards this strategy.

There is no cut/stop loss target for this strategy, so the total risk is the width of the spread.

Example: Sell one 300/290 put spread. Width of $10, so total risk is $1000.

So, if I already have five $10 put spreads, I won't enter any more positions.

Summary / Notes #

Will this shit actually work?

Based on the backtests, it has like 98% win rate, and over 300% return (over 10 years). If you increase allocation amount to like $20k, you get like 900% return??

Seems a bit crazy, so always need to keep in mind:

"Past results are no guarantee of future performance."

Microsoft could always tank for whatever reason, and I will lose all my money. I think $5k is OK for testing this strategy out for awhile. I've lost much more than $5k in the past 😅