Call Backspread Strategy
At low IV (IV Rank ivr_max or less) in an uptrend: sell a 0.50 Δ call and buy two 0.30 Δ calls, same expiry about 50 days out, for a credit or a debit under max_debit of the price. Close when the long calls double, or with 21 days left.
Default settings, 2020 to Nov 4, 2026.
By stock and year
Select a row to chart it below. Shade is the gap to buying and holding that stock.Defined risk by design: the long options in the structure cap the loss, so there is no separate hedged version.
| Stock | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 YTD | CAGR | B&H CAGR | Max drawdown |
|---|---|---|---|---|---|---|---|---|---|---|
| −14.3%−29.5 | −19.7%−46.6 | −0.0%+19.5 | −7.6%−31.9 | −14.8%−38.1 | −30.3%−46.6 | −34.4%−46.9 | −18.5% | +13.4% | −75.8% | |
| −10.9%−56.0 | −12.9%−39.7 | −0.3%+32.7 | −14.4%−68.2 | −13.3%−38.1 | −42.0%−62.1 | +2.4%−10.2 | −14.5% | +18.5% | −72.8% | |
| −0.3%−18.8 | −27.8%−41.1 | −7.3%+14.3 | +1.4%−13.7 | −10.3%−20.4 | −17.5%−28.9 | −29.1%−44.5 | −14.1% | +8.2% | −66.8% | |
| −2.1%−119.8 | +3.2%−122.0 | +0.9%+51.2 | +14.2%−224.7 | +29.3%−141.9 | −5.4%−44.3 | −23.4%−23.4 | +1.3% | +65.2% | −35.8% | |
| +15.6%−61.2 | −17.4%−51.3 | −6.1%+20.7 | −19.2%−67.3 | +9.0%−21.0 | −18.2%−26.8 | −0.4%−29.0 | −6.3% | +25.2% | −51.8% |
Growth of $10,000
Weekly closes on a log scale; the red shade is the strategy's drawdown from its last high. Returns are on the capital the strategy needed at its peak, with interest on idle cash. Hypothetical: how the backtests are made.
Rules · the when / do flow, read-only until you make a copyShow flow
The strategy runs as 1 track side by side. Each day, the first rule whose conditions hold in each track acts.
1. Backspread
- INLow IV: open the backspread
When:
book.open == 0andiv_rank <= ivr_maxandspot > sma(trend_days)Do: sell call (as short)delta short_delta (0.5)dte dte (50)dte_min dte_min (40)dte_max dte_max (70)avoid_earnings 1strict 1; buy call (as long)qty 2delta long_delta (0.3)strike_min leg.short.strike + 0.001expiry leg.short.expirystrict 1require 2 * new.cost - leg.short.cost <= spot * max_debit - TPThe long calls doubled: close
When:
leg.long.pnl_pct >= long_takeDo: close short; close long - EXexit_dte left: close
When:
leg.short.dte <= exit_dteDo: close short; close long - Closed or expired
When:
book.open == 0Do: nothing (hold)
Parameters and defaults
Every named number in the rules can be changed in the Rule Builder. These are the defaults the backtest used.
| Parameter | Default |
|---|---|
ivr_max | 30 |
trend_days | 50 |
max_debit | 0.005 |
short_delta | 0.5 |
long_delta | 0.3 |
dte | 50 |
dte_min | 40 |
dte_max | 70 |
long_take | 100 |
exit_dte | 21 |
Make a copy to change any of it and run your own backtest.
Trade log · every open, roll, assignment and close for SPYShow trades
Loading…
At low IV (IV Rank ivr_max or less) in an uptrend: sell a 0.50 Δ call and buy two 0.30 Δ calls, same expiry about 50 days out, for a credit or a debit under max_debit of the price. Close when the long calls double, or with 21 days left.
What it is
When IV Rank is 30 or less and the price is above its 50-day average, sell a 0.50 delta call and buy two 0.30 delta calls, same expiry about 50 days out, for a credit or a very small debit. Close when the long calls double, or at 21 days left.
When to use it
Use it when options are cheap and you expect a big move up: it profits from a sharp rally and loses little if the stock falls.
Maximum risk
The worst case is at the long strike at expiry: the distance between the strikes less any credit. Above that, gains have no limit; below the short strike, the loss is small or none.
Questions
Why does it lose in quiet markets?
It is long volatility. If the stock drifts, the two long calls lose time value faster than the short call.
Why only at low IV Rank?
Buying two options against one is cheapest when implied volatility is low.
What makes it pay?
A fast rally well past the long strike, before expiry.