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Short Strangle Strategy with Adjustments

NeutralIncomeThetaRules built-in

Sell a 0.16 Δ put and call at IV Rank 30+. Take half, stop at 2× the credit, out at 21 days. When a side is tested, roll the other toward it; after max_rolls, go to a straddle.
Default settings, 2020 to Nov 4, 2026.

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Select a row to chart it below. Shade is the gap to buying and holding that stock.

Unhedged: nothing protects against a crash beyond what the strategy itself holds.

Stock2020202120222023202420252026 YTDCAGRB&H CAGRMax drawdown
−4.2%−19.4+3.7%−23.2+3.1%+22.6+6.6%−17.7+3.7%−19.6+1.1%−15.2+2.7%−9.7 +2.4%+13.4%−6.5%
+0.5%−44.6+6.5%−20.3+2.6%+35.7+9.0%−44.8+4.7%−20.2+3.3%−16.8+3.4%−9.2 +4.4%+18.5%−7.1%
−4.6%−23.0+18.3%+5.0+13.1%+34.7+11.3%−3.8+11.6%+1.5+2.2%−9.2+5.7%−9.7 +8.2%+8.2%−19.4%
+1.1%−116.6+4.1%−121.1+4.1%+54.5+10.8%−228.2+3.3%−167.9+8.5%−30.4+5.4%+5.4 +5.4%+65.2%−3.0%
+2.2%−74.5+4.7%−29.1+6.9%+33.7+10.9%−37.3+6.0%−24.1+2.8%−5.8+0.4%−28.1 +4.9%+25.2%−5.2%
Gap to buy and hold: behind ahead · option prices before Feb 2024 are modelled, real quotes after

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 copy
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The strategy runs as 2 tracks side by side. Each day, the first rule whose conditions hold in each track acts.

1. Strangle

The put and the call, adjusted as one position

  1. INSell the strangle When: book.open == 0 and iv_rank >= ivr_minDo: sell put (as put) delta put_delta (0.16) dte dte (45) dte_min dte_min (30) dte_max dte_max (60) avoid_earnings 1 strict 1; sell call (as call) delta call_delta (0.16) expiry leg.put.expiry strike_min spot strict 1
  2. TPHalf the credit kept: close both When: book.pnl_pct >= take_pctDo: close put; close call
  3. SLLost stop_pct of the credit: close both When: book.pnl_pct <= -stop_pctDo: close put; close call
  4. SRA straddle by now: roll both out for a credit When: leg.call.strike <= leg.put.strike and min(leg.put.dte, leg.call.dte) <= straddle_roll_dteDo: roll put strike leg.put.strike dte dte (45) dte_min dte_min (30) dte_max dte_max (60) avoid_earnings 1 require new.mark + mid_call(leg.call.strike, new.expiry) > leg.put.mark + leg.call.mark; roll call strike leg.call.strike expiry leg.put.expiry
  5. EXexit_dte left: close both When: min(leg.put.dte, leg.call.dte) <= exit_dteDo: close put; close call
  6. APPut tested: roll the call down to roll_untested_to Δ (never below the put) When: spot <= leg.put.strike * (1 + test_pct) and max_rolls > 0 and leg.call.delta < roll_untested_to / 2Do: roll call delta roll_untested_to (0.3) expiry leg.call.expiry strike_min leg.put.strike
  7. ACCall tested: roll the put up to roll_untested_to Δ (never above the call) When: spot >= leg.call.strike * (1 - test_pct) and max_rolls > 0 and leg.put.delta < roll_untested_to / 2Do: roll put delta roll_untested_to (0.3) expiry leg.put.expiry strike_max leg.call.strike
  8. STRolls used up, put tested: move the call to the put strike (a straddle) When: spot <= leg.put.strike * (1 + test_pct) and max_rolls <= 0 and not (leg.call.strike <= leg.put.strike)Do: roll call strike leg.put.strike expiry leg.call.expiry strict 1
  9. STRolls used up, call tested: move the put to the call strike (a straddle) When: spot >= leg.call.strike * (1 - test_pct) and max_rolls <= 0 and not (leg.call.strike <= leg.put.strike)Do: roll put strike leg.call.strike expiry leg.put.expiry strict 1
  10. Closed or expired When: book.open == 0Do: nothing (hold)
  11. TPHalf the credit kept: close both When: book.pnl_pct >= take_pctDo: close put; close call
  12. SLLost stop_pct of the credit: close both When: book.pnl_pct <= -stop_pctDo: close put; close call
  13. SRA straddle by now: roll both out for a credit When: leg.call.strike <= leg.put.strike and min(leg.put.dte, leg.call.dte) <= straddle_roll_dteDo: roll put strike leg.put.strike dte dte (45) dte_min dte_min (30) dte_max dte_max (60) avoid_earnings 1 require new.mark + mid_call(leg.call.strike, new.expiry) > leg.put.mark + leg.call.mark; roll call strike leg.call.strike expiry leg.put.expiry
  14. EXexit_dte left: close both When: min(leg.put.dte, leg.call.dte) <= exit_dteDo: close put; close call
  15. APPut tested: roll the call down to roll_untested_to Δ (never below the put) When: spot <= leg.put.strike * (1 + test_pct) and max_rolls > 1 and leg.call.delta < roll_untested_to / 2Do: roll call delta roll_untested_to (0.3) expiry leg.call.expiry strike_min leg.put.strike
  16. ACCall tested: roll the put up to roll_untested_to Δ (never above the call) When: spot >= leg.call.strike * (1 - test_pct) and max_rolls > 1 and leg.put.delta < roll_untested_to / 2Do: roll put delta roll_untested_to (0.3) expiry leg.put.expiry strike_max leg.call.strike
  17. STRolls used up, put tested: move the call to the put strike (a straddle) When: spot <= leg.put.strike * (1 + test_pct) and max_rolls <= 1 and not (leg.call.strike <= leg.put.strike)Do: roll call strike leg.put.strike expiry leg.call.expiry strict 1
  18. STRolls used up, call tested: move the put to the call strike (a straddle) When: spot >= leg.call.strike * (1 - test_pct) and max_rolls <= 1 and not (leg.call.strike <= leg.put.strike)Do: roll put strike leg.call.strike expiry leg.put.expiry strict 1
  19. Closed or expired When: book.open == 0Do: nothing (hold)
  20. TPHalf the credit kept: close both When: book.pnl_pct >= take_pctDo: close put; close call
  21. SLLost stop_pct of the credit: close both When: book.pnl_pct <= -stop_pctDo: close put; close call
  22. SRA straddle by now: roll both out for a credit When: leg.call.strike <= leg.put.strike and min(leg.put.dte, leg.call.dte) <= straddle_roll_dteDo: roll put strike leg.put.strike dte dte (45) dte_min dte_min (30) dte_max dte_max (60) avoid_earnings 1 require new.mark + mid_call(leg.call.strike, new.expiry) > leg.put.mark + leg.call.mark; roll call strike leg.call.strike expiry leg.put.expiry
  23. EXexit_dte left: close both When: min(leg.put.dte, leg.call.dte) <= exit_dteDo: close put; close call
  24. APPut tested: roll the call down to roll_untested_to Δ (never below the put) When: spot <= leg.put.strike * (1 + test_pct) and max_rolls > 2 and leg.call.delta < roll_untested_to / 2Do: roll call delta roll_untested_to (0.3) expiry leg.call.expiry strike_min leg.put.strike
  25. ACCall tested: roll the put up to roll_untested_to Δ (never above the call) When: spot >= leg.call.strike * (1 - test_pct) and max_rolls > 2 and leg.put.delta < roll_untested_to / 2Do: roll put delta roll_untested_to (0.3) expiry leg.put.expiry strike_max leg.call.strike
  26. STRolls used up, put tested: move the call to the put strike (a straddle) When: spot <= leg.put.strike * (1 + test_pct) and max_rolls <= 2 and not (leg.call.strike <= leg.put.strike)Do: roll call strike leg.put.strike expiry leg.call.expiry strict 1
  27. STRolls used up, call tested: move the put to the call strike (a straddle) When: spot >= leg.call.strike * (1 - test_pct) and max_rolls <= 2 and not (leg.call.strike <= leg.put.strike)Do: roll put strike leg.call.strike expiry leg.put.expiry strict 1
  28. Closed or expired When: book.open == 0Do: nothing (hold)
  29. TPHalf the credit kept: close both When: book.pnl_pct >= take_pctDo: close put; close call
  30. SLLost stop_pct of the credit: close both When: book.pnl_pct <= -stop_pctDo: close put; close call
  31. SRA straddle by now: roll both out for a credit When: leg.call.strike <= leg.put.strike and min(leg.put.dte, leg.call.dte) <= straddle_roll_dteDo: roll put strike leg.put.strike dte dte (45) dte_min dte_min (30) dte_max dte_max (60) avoid_earnings 1 require new.mark + mid_call(leg.call.strike, new.expiry) > leg.put.mark + leg.call.mark; roll call strike leg.call.strike expiry leg.put.expiry
  32. EXexit_dte left: close both When: min(leg.put.dte, leg.call.dte) <= exit_dteDo: close put; close call
  33. STRolls used up, put tested: move the call to the put strike (a straddle) When: spot <= leg.put.strike * (1 + test_pct) and max_rolls <= 3 and not (leg.call.strike <= leg.put.strike)Do: roll call strike leg.put.strike expiry leg.call.expiry strict 1
  34. STRolls used up, call tested: move the put to the call strike (a straddle) When: spot >= leg.call.strike * (1 - test_pct) and max_rolls <= 3 and not (leg.call.strike <= leg.put.strike)Do: roll put strike leg.call.strike expiry leg.put.expiry strict 1
  35. Closed or expired When: book.open == 0Do: nothing (hold)

2. Crash put

A cheap far put under whatever is held; hedge_delta 0 turns it off

  1. CP1Something is held and no crash put: buy one When: hedge_delta > 0 and leg.hedge.open == 0 and shares >= 100 or book.open > 0Do: buy put (as hedge) qty max(1, round(shares / 100)) delta hedge_delta (0) dte hedge_dte (90) dte_min hedge_replace_dte + 7 strike_max spot - 0.001 strict 1
  2. CP2Nothing left to protect: sell it When: leg.hedge.open == 1 and shares < 100 and book.open <= 1Do: close hedge
  3. CP3Down to its last month, or worth hedge_take_x its cost: sell it and buy a fresh one When: leg.hedge.open == 1 and leg.hedge.dte <= hedge_replace_dte or (hedge_take_x > 0 and leg.hedge.mark >= leg.hedge.cost * hedge_take_x)Do: close hedge; buy put (as hedge) qty max(1, round(shares / 100)) delta hedge_delta (0) dte hedge_dte (90) dte_min hedge_replace_dte + 7 strike_max spot - 0.001 strict 1

Parameters and defaults

Every named number in the rules can be changed in the Rule Builder. These are the defaults the backtest used.

ParameterDefault
put_delta0.16
call_delta0.16
dte45
dte_min30
dte_max60
ivr_min30
take_pct50
stop_pct200
exit_dte21
test_pct0.01
roll_untested_to0.3
max_rolls2
straddle_roll_dte21
hedge_delta0
hedge_dte90
hedge_replace_dte30
hedge_take_x3

Make a copy to change any of it and run your own backtest.

Trade log · every open, roll, assignment and close for SPY
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neutralincome

Sell a 0.16 Δ put and call at IV Rank 30+. Take half, stop at 2× the credit, out at 21 days. When a side is tested, roll the other toward it; after max_rolls, go to a straddle.

What it is

Sell a 0.16 delta put and a 0.16 delta call about 45 days out when IV Rank is 30 or more. Take half the credit, stop at twice the credit, and close at 21 days left. When one side is tested, roll the other side toward it; after the allowed number of rolls, move it to a straddle.

When to use it

Use it on liquid underlyings in a range-bound market with elevated implied volatility, when you expect the price to stay between the strikes.

Maximum risk

The call side has unlimited risk and the put side nearly full share downside. The stop at 200% of the credit limits losses in normal conditions but not across overnight gaps.

Questions

Why 0.16 delta?

Around one standard deviation out: roughly a 68% chance of both legs expiring worthless at the start, with a meaningful credit.

Why close at 21 days?

Gamma risk grows fast in the last weeks. Closing at 21 days gives up the last bit of premium to avoid the sharpest moves.

What does rolling the untested side mean?

If the put is tested, the call is moved down toward the price for more credit, which widens the break-even on the put side.

Related strategies

Iron condorSell a 0.16 Δ put spread and call spread, wings wing_pct apart, at IV Rank 30+. Take half, stop at 2× the credit, out at 21 days; roll a tested side out once for a credit.Calendar spreadSell a ~30-day at-the-money call, buy the same strike ~60 days out, when IV Rank is ivr_max or less and the front month's IV is at least iv_ratio × the back month's. Take 25%, stop at 50%, out before the front expires or if the price runs.Covered straddle wheelThe 2-lot wheel: an at-the-money put; if assigned, a covered straddle (or strangle); if assigned again, covered calls on both lots. 10% below the cost basis, repair; 30% below, review.