We were asked, "Can I backtest a covered call strategy on the SPY where the equity exposure is delta-hedged daily to a specific delta e.g. 0.75."

Yes, you can.

First, set up the short call backtest and delta hedge the call. This will have a zero equity exposure.

null

 

Next, backtest SPY LongStock.

null

 

Finally, in the backtest view, select both strategy check boxes and combine the strategies with the following weights:

null

 

Assign 75 percent weight to long stock and combined with a delta neutral short call the resulting equity exposure will be 75 delta.

The result will be a delta neutral short call plus a 75 delta SPY long stock.

More reading here.

related posts

Check Options Strategies With Backtesting
Oct
28
Backtesting, options trading, puts, implied volatility

Check Options Strategies With Backtesting

You may see an options strategy with good returns. But how can you get more confidence in the...

Read Post
Talking Hedging, Concentrated Positions and Volatility at Texas Alts in Dallas
Oct
16
Options Strategy, Backtesting, Understanding Options

Talking Hedging, Concentrated Positions and Volatility at Texas Alts in Dallas

Matt Amberson, Principal at ORATS, Eric Metz of SpiderRock Advisors and Joe Burgoyne of the OIC...

Read Post

We're here, if you need us.

Still curious how we can help you?




LET'S CHAT