Skip to content
All library documents

Backtesting a Bitcoin Weekend Volatility Selling Strategy

Article Deribit Insights
Read the original

Summary

This article tests whether selling short-dated Bitcoin options on Friday can benefit from historically quieter weekend price action. Its main setup sells a 0.35-delta strangle at 16:00 UTC on Friday, with Sunday 08:00 UTC expiry, and holds both options to expiry. The backtest includes regular fees and an assumed slippage charge, uses fixed option quantities, and compares a period in 2024 with a longer sample beginning in 2020. It reports profitable results in both periods, while the longer sample includes more severe market disruptions and shows larger drawdowns.

The article varies entry time and target delta, finding that the tested strategy remained profitable across the displayed settings, with better results for later entries and higher deltas. It also discusses Calmar ratios and explains that hourly observations may understate drawdowns. The author flags limited trade counts, negative skew, overfitting, look-ahead bias in motivating the idea, unseen extreme events, and changing market conditions. These historical results do not establish that the strategy will remain profitable.

Key ideas

  • The tested strategy sells a Friday Bitcoin strangle that expires early Sunday and holds it to expiry.
  • The backtest accounts for stated fees and premium slippage while keeping trade quantities fixed.
  • The article reports positive results across its 2024 and longer historical samples, with larger drawdowns in the longer sample.
  • Parameter checks suggest that entry time and option delta affect returns and risk-adjusted performance.
  • Negative skew, sample limits, hourly data, possible overfitting, and future market changes constrain the conclusions.

Tags

CryptoOptionsVolatilityBacktestingRisk management

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.