I've done enough research over the past 6-8 months and watched how naked puts perform in real time under just about any scenario to have full confidence that my back test was done correctly. Its not exact, but I have confidence that it's pretty close.
In 2009, SPY was +26.5%. Naked puts were +38.8%.
In 2008, SPY was -37.1%. Naked puts were +15.9%.
Naked puts outperformed SPY in every year from 2005-present so I don't agree that that will only outperform in a down market. When the market rises sharply in a short time frame like it did last month, then yes, naked puts will lag, but even in a great year like 2009, the majority of weeks the market goes nowhere and the puts are racking up profits. The biggest criticism of selling naked puts or covered calls that I've seen is that you make small amounts week after week and then you get killed one week. This is true. In a bad week, you can lose 8-10 weeks worth of profits but long term its a winning strategy. Most people just don't have any patience and give up as soon as they see one bad week because its gut wrenching to lose 2 months worth of profits in 2-3 days. If it was easy, everyone would do it.
I also tested monthly naked puts vs weekly naked puts and the weeklies outperformed dramatically. I've traded monthly naked puts in real time and found them to be pretty lackluster with returns just slightly above the SP500 so I stopped trading them back before weeklies had even been invented.
So while I appreciate a healthy does of skepticism, I believe you are wrong. I believe that the weeklies naked puts will significantly outperform the SP500 and the weeklies will significantly outperform monthlies.
Having said all of that, I'm really not all that concerned with how much naked puts outperform the general market, just that they make money. I'm fully invested already and would never buy SPY on margin because margin interest rates are too high. I'm only using my margin as collateral to finance the naked puts. Any profit is gravy on top of whatever returns I get from my B&H portfolio
In 2009, SPY was +26.5%. Naked puts were +38.8%.
In 2008, SPY was -37.1%. Naked puts were +15.9%.
Naked puts outperformed SPY in every year from 2005-present so I don't agree that that will only outperform in a down market. When the market rises sharply in a short time frame like it did last month, then yes, naked puts will lag, but even in a great year like 2009, the majority of weeks the market goes nowhere and the puts are racking up profits. The biggest criticism of selling naked puts or covered calls that I've seen is that you make small amounts week after week and then you get killed one week. This is true. In a bad week, you can lose 8-10 weeks worth of profits but long term its a winning strategy. Most people just don't have any patience and give up as soon as they see one bad week because its gut wrenching to lose 2 months worth of profits in 2-3 days. If it was easy, everyone would do it.
I also tested monthly naked puts vs weekly naked puts and the weeklies outperformed dramatically. I've traded monthly naked puts in real time and found them to be pretty lackluster with returns just slightly above the SP500 so I stopped trading them back before weeklies had even been invented.
So while I appreciate a healthy does of skepticism, I believe you are wrong. I believe that the weeklies naked puts will significantly outperform the SP500 and the weeklies will significantly outperform monthlies.
Having said all of that, I'm really not all that concerned with how much naked puts outperform the general market, just that they make money. I'm fully invested already and would never buy SPY on margin because margin interest rates are too high. I'm only using my margin as collateral to finance the naked puts. Any profit is gravy on top of whatever returns I get from my B&H portfolio