Backtesting Bitcoin Short-Dated Strangles Across Weekdays
Summary
This study tests a short-volatility strategy that sells a 0.35-delta Bitcoin strangle shortly before the weekend, holding the options to expiry and accounting for fees and assumed slippage. It extends an earlier historical test through April 2025, then compares Friday entries with daily entries, examines Sunday trades separately, and applies the Friday strategy to Ether. The reported results show profits over the tested Friday periods, while daily trading at reduced size had lower returns and a larger absolute drawdown. Sunday-only positions lost substantially, and the Ether version had weaker performance than Bitcoin.
The author emphasizes that the strategy has negatively skewed returns: frequent small gains can conceal occasional large losses, especially in a short sample. The daily test also creates overlapping positions, complicating risk comparisons. Results depend on the chosen period, sizing assumptions, and historical market conditions; they do not establish future profitability, and the author notes that growing institutional volatility supply could change the pattern.
Key ideas
- The tested Friday strategy sells short-dated 0.35-delta Bitcoin strangles and holds them to expiry.
- Historical Friday results were profitable, but the strategy’s negatively skewed returns can hide infrequent large losses.
- Daily entries created overlapping exposure, and halving trade size still produced a larger maximum absolute drawdown than the Friday approach.
- Sunday entries performed poorly in the sample, while buying the same options did not provide a compelling inverse strategy.
- The Ether version had lower profit and a larger drawdown than the Bitcoin version in the reported comparison.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.