Strangling the weekly options, back testing

I downloaded the historical data for SPY from about 1993 to date and ran three checks.

The first compared the opening price on Thursdays to the closing price on Fridays to represent the percentage move over those two days. The second compared the opening on Wednesday and the Third the opening on Tuesday, again to the close on Friday.

These tests would show the number of times that the price of SPY, in my first test, moved 4% over one of these periods. Now this does not reflect the trades being set at strikes that are greater than 4% away nor does it factor times that I might only make one side of a trade to reduce risk during particularly edgy times. I am assuming that I am trying to set this as a, more or less, automatic style of trading where I can place the trades according to strict rules. I would count all the trades, winners and losers, and use the lowest target trade entry price. For a full strangle my lowest acceptable credit would be 10 cents. That may change as I track the current weekly trade possibilities, but it is a good conservative number for now.

These tests would also count a cumulative profit and increase the trade size as the capital base grew. I know that weekly options were not available in 1993, not actually until fairly recently, so the exercise is for interest sake mainly. At least the testing covers the tech bubble and the latest bear market and the infamous flash crash.

More on the results tomorrow.

Jeff.