Buy an ATM call and ATM put simultaneously — profits from large moves in either direction.
| Symbol | Return % | Sharpe | Max DD % | Win % | Avg/trade % | Trades |
|---|---|---|---|---|---|---|
| SPY | +1901.0% | 0.59 | +137.5% | +63.2% | +100.1% | 19 |
| QQQ | +3340.1% | 0.86 | +144.4% | +79.0% | +175.8% | 19 |
| IWM | +2931.5% | 0.77 | +78.7% | +68.4% | +154.3% | 19 |
| DIA | +1992.9% | 0.71 | +166.1% | +79.0% | +104.9% | 19 |
| Avg | +2541.4% | 0.73 | +131.7% | +72.4% | — | 19 |
| Parameter | Default | Description |
|---|---|---|
| dte | 45 | Days to expiration |
A long straddle buys an ATM call and ATM put at the same strike and expiration. It profits when the underlying makes a large move in either direction, exceeding the total premium paid. The strategy is a pure volatility bet — it wins when realised volatility exceeds implied volatility. It loses when the underlying stays near the strike (time decay erodes both legs). Backtested with 45 DTE cycles at the nearest round-number ATM strike.
# Long Straddle: buy ATM call + buy ATM put
for entry in monthly_entries:
S = spot_at_entry
K = round(S / 5) * 5 # ATM strike
T = 45 / 365.25
prem_call = black_scholes_call(S, K, T, r, sigma)
prem_put = black_scholes_put(S, K, T, r, sigma)
debit = prem_call + prem_put
S_exp = spot_at_expiry
payoff = max(0, S_exp - K) + max(0, K - S_exp)
pnl = payoff - debit
pnl_pct = pnl / debit * 100