10 DTE SPY Bull Put Spreads (SPY Short Term Strategy)
Update Jan 2025: I haven't been using this strategy for the past few months. It was actually very profitable for me when I did use it. It works very well in bull markets, and I got lucky and made a bunch of money in the 2024 market boom. Despite this, I have decided it takes on too much risk for my portfolio size. I have decided to shift to a a more conservative 45+ DTE strategy instead. Perhaps I will start trading this strategy again when I have a bigger account.
I wanted a strategy that I could trade every week to relieve the itchy trigger finger (i.e. that need to make a trade feeling).
Maybe this is not the most optimal strategy, but it'll keep me busy.
I ran some backtests on optionalpha.com, and the returns are OK, outperforming basic SPY CAGR (Compound Annual Growth Rate).
Basic overview #
Every week sell a SPY 10 day to expiry (DTE) bull put spread at 0.15/.05 delta.
Entry rules #
Every Monday or Tuesday, sell a 10 DTE credit spread on SPY (i.e. Sell put @ 0.15 delta, buy call @ 0.05 delta).
Exit rules #
No profit taking. Just let it run to expiry.
Stop loss at approximate 200% of credit received.
Allocation amount #
Will start with selling 1 spread per week, and work my way up (or down) from there.
Summary / Notes #
This is a simple trading strategy to help relieve the itch every week.
The main downside is that you will still take a decent losses, especially on market downturns.
Based on backtests, max drawdown over the past 5 years is around 20-30%.
Also, not sure about the stop loss amount, but according to the backtests, it helps in the long run. So, we'll just go with it for now.