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 | -955.6% | -1.33 | +866.6% | +15.8% | -50.3% | 19 |
| QQQ | -861.2% | -1.16 | +784.8% | +10.5% | -45.3% | 19 |
| IWM | -743.5% | -1.08 | +674.2% | +15.8% | -39.1% | 19 |
| DIA | -779.4% | -1.11 | +766.1% | +10.5% | -41.0% | 19 |
| Avg | -834.9% | -1.17 | +772.9% | +13.2% | — | 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