# Short Strangle Backtest: A High Win Rate That Still Loses Source: https://theoptionsbench.com/short-strangle-backtest/ > Plain-text mirror for AI/LLM ingestion. Canonical HTML page: https://theoptionsbench.com/short-strangle-backtest/ --- Updated 3 September 2026 · by Theo Chen A short strangle is the classic "high probability" income trade: sell an out-of-the-money Put and an out-of-the-money Call, collect two premiums, and win as long as the stock stays between the strikes. It wins most months - which is exactly why it seduces people. It is also **undefined risk on both sides**: the short Call loss has no ceiling, and the short Put runs almost to zero. So the only question that matters is what the rare losing months cost. We backtested it on 14 years of real S&P 500 option chains - seven different strikes, every leg at the real bid/ask mid. Two findings survive every way we sliced the data. **One: the win rate is real and the profit is a mirage.** A monthly 16-delta SPY strangle won 78.4% of months from 2010 to 2023 and made 0.75% a year, while simply holding SPY's price alone returned 10.73% a year (dividends excluded). **Two: it does not matter which strike you sell.** Across seven deltas the returns are statistically indistinguishable - there is no "best" strangle to optimize toward, only different ways to lose to buy-and-hold while carrying unlimited risk. ## The scorecard: dollars per contract (2010-2023) The same trade at seven strikes, run on the same 167 monthly cycles, every leg filled at the real bid/ask mid and held to expiration. Because a strangle has no natural collateral, the honest way to score it is in **dollars per contract**, not a percentage: | Strike | Win rate | Avg credit | Total P/L, 14y | Worst month | Winners erased | Max DD | | 5Δfar OTM, "safest" | 95.8% | $62 | $1,567 | -$6,632 | 110 | -23.2% | | 10Δwide | 85.6% | $126 | $2,164 | -$7,668 | 64 | -30.3% | | 16Δ ★tastytrade standard (~1 SD) | 78.4% | $212 | $2,155 | -$8,343 | 42 | -35.2% | | 20Δin-sample top total* | 73.7% | $275 | $2,871 | -$8,574 | 34 | -36.9% | | 25Δ | 70.1% | $358 | $2,601 | -$8,879 | 29 | -39.3% | | 30Δ | 67.1% | $450 | $2,276 | -$9,045 | 26 | -39.8% | | 40Δnear the money | 61.4% | $663 | $2,164 | -$9,309 | 22 | -40.7% | How many average winning months a single worst month wipes out. 16-delta is the common tastytrade default. *20-delta merely printed the highest total on this one sample - see why that means nothing below. Read down the win-rate and total columns together. Win rate falls steadily from 95.8% (5-delta) to 61.4% (40-delta) - but **total profit barely moves**, from $1,567 to $2,871. The far-OTM 5-delta wins 95.8% of the time and earns the _least_; one crash still erases about 110 of its winning months. Selling further out buys a prettier win rate and nothing else - the drawdown just gets shallower because the credit was smaller to begin with. ## Does the strike you pick matter? The statistics say no It is tempting to look at that table, see 20-delta on top ($2,871), and call it the sweet spot. That would be a mistake - and it is worth seeing exactly why, because it is the trap in every strategy backtest. A single month's strangle P/L swings enormously (a typical 16-delta month is about $731; March 2020 alone was -$8,343). Over 167 months those swings add up to a **standard error** - the "give or take" on the 14-year total - of roughly $6,729 to $12,608 per strike. So each total in the table is really "that number, give or take about $12,608." The _entire_ spread between the best and worst strike is only **$1,304** - about 9.7x _smaller_ than the noise on any one of them. You cannot rank numbers whose differences are dwarfed by their own error bars. The proper test makes it starker. Because all seven strikes trade the _same_ months, they crash and rally together - so to compare two of them you look at their month-by-month _difference_, where the shared market move cancels out. Do that and 20-delta versus 25-delta is a $270 gap against a $1,423 error (a t-statistic of 0.19); 20-delta versus 16-delta, 0.55. No pair anywhere in the sweep clears a t of 0.6 - you need about 2 to call a difference real. And the "winner" is not even stable: 20-delta tops the full sample, but drop 2020 and **25-delta** takes the lead instead. **The takeaway:** there is no measurable best delta for a short strangle. The strike changes how _often_ you win and how the loss is shaped, but not how much you make. Anyone selling you a specific "optimal" delta from a backtest is reading noise. ## The tail: where a year of income goes to die Here are the five worst months for the headline 16-delta strangle. Notice the scale against the $197 average winner: | Expiry | SPY move | Put / Call strike | Credit taken | Month P/L | | 2020-03-20 | $333 -> $229 | 315 / 343 | $262 | -$8,343 | | 2020-04-17 | $229 -> $287 | 190 / 263 | $696 | -$1,660 | | 2018-12-21 | $274 -> $241 | 256 / 286 | $247 | -$1,282 | | 2022-05-20 | $438 -> $390 | 406 / 459 | $492 | -$1,149 | | 2021-04-16 | $389 -> $417 | 366 / 405 | $335 | -$901 | The March 2020 crash is the whole story in one row: SPY fell from $333 to $229 in a single expiry cycle, blew straight through the 315 Put, and turned a $262 credit into a -$8,343 loss. That one month erased about 42 average winning months. And it could have been far worse - the put stopped losing only because the crash did; the short Call in an equivalent melt-up has no such floor. ## Growth of $100,000: undefined risk, T-bill returns To compare against buy-and-hold you need a capital base. We use the most generous honest one: fully cash-secure the short Put like a cash-secured put, with the short Call riding on the account's margin. On that basis, here is $100,000 in all seven strangles against simply owning SPY: Gold = buy & hold SPY (price return). Red = the seven strangles (5-40 ). They cluster so tightly you can barely tell them apart - and all crawl along the bottom while SPY compounds. Buy-and-hold (SPY price only, no dividends reinvested) turned $100,000 into $413,000. Every strangle, at every strike, finished between $103,269 and $112,320 - 0.23% to 0.84% a year against that same price-only 10.73%, at drawdowns of 23.2% to 40.7%, **while carrying unlimited risk the whole time.** You took the worst risk profile in options - a capped, tiny gain against an uncapped, enormous loss - to underperform the thing you were selling options on. And this base _flatters_ the strangle. Cash-securing the Put reserves nothing for the naked Call: in a sharp rally a real margin account would face a margin call and be forced to buy the Call back at a loss, or post more capital, exactly when it hurts most. The smooth-looking line hides a financing risk the chart cannot show. ## The tiny edge rests on 2022 The small full-sample profit depends heavily on one year, not two. Every delta improves when 2020 is removed because the crash loss outweighed the premium collected in the rebound. Remove 2022 instead and the result collapses: | Strike | Full 14y | Excluding 2020 | Excluding 2022 | | 5 | $1,567 | $7,316 | -$62 | | 10 | $2,164 | $8,907 | +$6 | | 16 ★ | $2,155 | $9,255 | +$407 | | 20 | $2,871 | $10,088 | +$754 | | 25 | $2,601 | $10,198 | -$172 | | 30 | $2,276 | $9,862 | -$38 | | 40 | $2,164 | $10,050 | +$101 | Removing 2020 improves all 7 variants. For 16-delta, the total rises from $2,155 to $9,255. Removing **2022** instead cuts it to $407 and pushes the far-OTM 5-delta **negative** (-$62). The positive 14-year result depended heavily on 2022 alone. That one-year dependency makes the edge fragile. It also exposes the distinction worth keeping: a short strangle survives a slow **grind** (in 2022 SPY fell about 19% yet the strangle made +$1,748) and dies in a fast **gap** (the 2020 crash, -$7,101). It feels safe for years - right up until the one fast crash that defines its whole record. ## What this means for how you trade - A high win rate is bait, not a moat. The 5-delta won 95.8% of months and earned the least of any strike. Judge an income trade by its worst month and its total, never its win rate. - Stop optimizing the delta. The seven strikes are statistically indistinguishable on return - the whole spread is 9.7x smaller than the noise. A backtest that hands you an "optimal" strike is fitting randomness; it will not repeat. - The undefined risk is the whole point, and it never goes away. The short Call is unlimited; the short Put runs to near-zero. If you can't define and survive your worst case, you can't size the trade. Prefer a defined-risk iron condor if you want the same range bet with both tails capped. - If you still sell Short Strangles, use broad, liquid indices and size for a multi-times-credit loss. Our management study found a 21-DTE exit acted as tail insurance, not a return booster, while a 50% profit target did not change the Short Strangle's worst month. Model the exact trade in the Short Strangle Calculator first. ## Caveats - read these - Held to expiration, no management. This is a deliberate worst-case baseline. Managing at 21 DTE or 50% profit would trim the tail (and the win rate) - real traders should not hold a losing strangle into a crash. The direction is clear; the exact numbers would improve. - The percentage returns assume the Put is fully cash-secured. That is not how strangle margin actually works - a real account posts far less, which scales both the return and the risk up sharply. The dollar-per-contract figures are base-free and are the honest core; read the percentages as an idealized, generous framing. - Mid fills flatter the wider strikes. We fill at the bid/ask mid; at realistic fills you cross a wider spread on the fatter near-money credits, so part of the "flat across strikes" shape is a fill-model artifact, not the market. It pushes toward, not away from, the no-best-strike conclusion. - One 40-delta cycle is missing (166 vs 167). An out-of-the-money-only strike filter dropped a single 40-delta month that was actually a small winner, so the 40-delta total is very slightly understated - immaterial to any conclusion here, but disclosed. - Settled at intrinsic; no commissions or early-assignment. European-style settlement and the odd early assignment on a deep-ITM leg would make the real result modestly worse, never better. - One window, one underlying. SPY, 2010-2023, monthly ~30-DTE cycles at fixed deltas. A different index, a single stock (which can gap far harder), or a different era would shift the numbers. Past performance is not predictive. Educational, not advice. Method: real OptionsDX end-of-day SPY option chains, 2010-01-15 to 2023-12-15 (167 monthly third-Friday cycles). Each cycle sells a short Put and short Call at the 5-, 10-, 16-, 20-, 25-, 30- and 40-delta strikes chosen by each option's real delta, priced at the real bid/ask mid, held to expiration, no early management, and settled at intrinsic against the real SPY close on the expiration trading day. Percentage returns compound each cycle's dollar P/L over the short-Put strike (cash-secured base). Buy-and-hold is SPY price return over the same window. The "no measurable best strike" verdict uses the paired-difference standard error (the month-by-month difference between two strikes x the square root of the sample), the correct test for settings run over the same periods. Every figure regenerates from the underlying chains and is independently re-derived from the raw files (all 7 delta aggregates plus raw-cycle re-derivations verified); none are hand-entered. Cite this study Theo Chen. Short Strangle Backtest: Yearly P&L. The Options Bench, 2026. https://theoptionsbench.com/short-strangle-backtest/. Licensed under CC BY 4.0. Download the underlying data: JSON CSV The bottom line A monthly SPY short strangle won 78.4% of months over 14 years and still lost the race badly - 0.75% a year on a cash-secured base against buy-and-hold SPY's price return of 10.73% (no dividends), because one crash month (-$8,343, March 2020) erased 42 winners. We tested seven strikes (5-40 delta): none was measurably best - the whole spread between them ($1,304) is smaller than the noise on any one (~$12,608), so there is no strike worth optimizing for. A short strangle is undefined risk on both sides: treat the high win rate as bait, not safety. ## Frequently asked questions Is a short strangle profitable? In our 14-year SPY backtest it was barely profitable and badly lagged the index. A monthly 16-delta strangle won 78.4% of months but made just $2,155 of total profit per contract over 14 years - about $13 a month. On a fully cash-secured base that is 0.75% a year, against buy-and-hold SPY's price return of 10.73% (excludes dividends). That small positive leans heavily on 2022 alone: remove 2022 and the 16-delta total falls from $2,155 to $407, while removing 2020 lifts it to $9,255. One year carries the result. That is a fragile edge, not a durable one. What is the maximum loss on a short strangle? Unlimited on the call side and nearly unlimited on the put side. The short call has no ceiling - if the stock keeps rising, the loss keeps growing. The short put loses all the way down to the strike price (times 100). Our worst single month was -$8,343 per contract in the March 2020 crash, when SPY fell 31.3% in one expiry cycle and blew through the short put. That one month erased roughly 42 average winning months - and it was only that "small" because the crash stopped; a deeper fall scales the loss further. Which delta is the best strike to sell a strangle at? On this data, none is measurably best - and that is the most important finding. We tested seven strikes from 5-delta to 40-delta. Their 14-year totals span only $1,304, but the statistical noise on any one of those totals is $6,729-$12,608 (about 9.7x larger than the whole spread). Even the correct paired test - comparing strikes over the same months - cannot separate them (every pair scored a t-statistic under 0.6, where you need about 2 to call a difference real). The strike that happened to top the table (20-delta) flips to 25-delta the moment you drop 2020. Translation: do not optimize the delta on a backtest; the ranking is noise and will not repeat. Does a higher win rate make a short strangle safer? No - that is the trap, and the sweep proves it. The 5-delta (sold far out of the money) won 95.8% of months - the highest win rate of all - yet earned the LEAST total profit ($1,567), and one crash still erased about 110 of its winning months. The 40-delta won only 61.4% of months but earned about the same total. Win rate measures how often you win, never how much; selling further out just spreads the same thin edge over more months and makes each rare loss erase proportionally more of them. Is a short strangle better than buy-and-hold? Not on this test, at any strike. Every one of the seven deltas returned between 0.23% and 0.84% a year on a fully cash-secured base, against buy-and-hold SPY's price return of 10.73% (dividends excluded) - or roughly 13% a year once dividends are counted, the fairer comparison. You took on unlimited, undefined risk to underperform the index by roughly ten points a year on price return, closer to twelve on total return. The strangle's only edge was a smoother ride in calm years; in the one year it mattered (2020) it lost 26.0% while carrying a risk of far worse. How should you manage a short strangle to reduce the risk? Our backtest deliberately held every strangle to expiration with no management - a worst-case baseline. In practice the standard risk controls are: close or roll at around 21 days to expiration, take profits near 50% of the credit, keep positions small (a strangle can lose many times its credit), and only sell on broad, liquid indices you can hedge - never single stocks that can gap on earnings or a buyout. None of these remove the undefined risk; they just make the tail less likely to ruin you. You can model any strangle in the short strangle calculator, which keeps the unlimited-risk warning front and centre. ## Related questions - What is a short strangle, and why is it undefined risk? - Price a specific short strangle - How does an iron condor cap both tails? - Does selling options when IV is high help?