07
Feb
Tastytrade Credit Spreads, 11 Year Backtest

Tastytrade Credit Spreads, 11-Year Backtest

SJ Options specializes in developing options trading systems, and we’ve partnered with a software service that specializes in backtesting options strategies.

We’ve received numerous inquiries from our options trading community, and people want to know how well the tastytrade credit spread formula back-tests.

People have inquired about the following tastytrade credit spread:

Tastytrade Credit Spread (Vertical) Rules

  1. Sell credit equal to 1/3 the spread width.
  2. Begin trade 45 DTE (Days to expiration)
  3. Only trade when IV Rank is from 50% to 100%
  4. Manage winners at 50% credit.
  5. Stop losses if spread prices reaches 2X the credit.

Backtest

  • SPX
  • 2005 to February 2016 (11 total years and 1 month)
  • Allocate 5%, 10%, 25% and 50% of capital into trades

Results

General Statistics

  • 61% winners
  • 7 years produced losses
  • 4 years produced profits

Test 1: 5% capital allocated

  • -7% total 11-year return

Test 2: 10% capital allocated

  • -19% total 11-year return

Test 3: 25% capital allocated

  • -56% total 11-year return

Test 4: 50% capital allocated

  • -93% total 11-year return

 

A search on the tastytrade website returns over 200 classes on verticals and credit spreads:

credit spreads

vertical spreads

 

A search for term “vertical backtest” returned 0 results:

vertical backtest

 

Importance of Backtesting

Advanced backtesting tools are the backbone of nearly all successful options traders.  Without the proper tools you may never be able to profit from the stock market.

SJ Options can provide you with better trading systems and the tools you need to succeed in this very competitive industry.

For more information about developing and testing options trading systems, please feel free to contact us.

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