Account Setup

• Aim to use 1/3 of account size for campaign. This isn’t possible on IBKR.

Trade Entry

• Enter new trade every Monday
• Ladder up to 8-10 tranches/units
• Aim for 350 DTE
• Target 12-14 Delta
  • Or target around $5.5-9cr (depending on number of contracts)
• Sizing: find a credit such that the MAL ≤ 2% Net Liq
• Aim for 25-30% credit-to-BP ratio, if possible

Trade Management

• 30% profit target
• Stop Loss options:
  • Take assignment
  • Roll if you have BP available and price gets near strike
  • Stop Loss at 2% of Net Liq
  • 2X Max Loss (200% Stop Loss or 3X initial credit Stop Loss
• No more than 8-10 positions opened at a time
  • Average of 44 DIT
• In a worst-case scenario, consider taking stop losses on 4 units and taking assignment or rolling on the other 4

Trade Notes

I’ve conducted multiple backtests on the SPY LEAPS campaign and identified some key adjustments to optimize performance. Our goal is to maximize profit/loss (P/L) while minimizing both the average loss and the average days in trade (DIT).

To achieve a lower average DIT, we can reduce the days to expiration (DTE). Additionally, adjusting the profit target to between 25-30% will also lower the average DIT.

The optimal setup I’ve found is using 14 Delta, 350 DTE, with a profit target at 30% and a Stop Loss of $46 ($4600, which is 2% of $230,000).