As part of our 6-12-12 LP Factory research, I ran a manual 6 year long (2,300 day) Option Net Explorer (ONE) backtest. Once completed I then used the “play” feature within ONE and recorded a video that walks through every day of this 6 year test.

 

The intent of the video is to allow you to walk through the ENTIRE 6 year test, one day at a time, and stop to study any specific area that you like. I feel a video like this can help you gain valuable insights and allow you to get a very good sense of how the strategy performs on a continual/daily basis. In my opinion, it can be just as IMPORTANT to study/analyze the mundane parts of the test as it is to simply study the crash events. A lot of action can happen during the periods between crash events and the only way you can get a sense of that is by studying a continual test.

 

 

This video is about 67 minutes long... but obviously you can speed it up and/or skip to specific areas if you would like (but again, I recommend watching the entire video).

 

   

3 important notes about this 6 year backtest:

 

Note 1) Instead of entering (1) 60 DTE 1 delta LP every week, I opted for the method of entering (2) 60 DTE 1 delta LPs every other week. This alternative LP entry method is essentially the same as the once per week entry method and it doesn’t adversely affect the results.

 

Note 2) There were 3 crash events during this 6 year test where the hedge factory trade went to flat (i.e. we exited the hedge and waited until the market settled down a bit before starting the hedge trade back up).

 

In order to make this 6 year test run as one continuous/consecutive trade within ONE, I had to enter a very small, super far OTM “filler” trade during these flat periods that occurred after each crash event. So when you are viewing the video, you will see a small, inconsequential trade after the each crash event during the flat periods.

 

Note 3) Since the ONE Program is unable to accommodate the SPY hedging positions (because ONE will not allow you to combine multiple symbols together in the same testing environment), we have to use a pseudo trade for the SPY shares. To closely replicate 10 SPY shares, we insert 1 SPX position in its place. Please see the diagram below for more information.

 

 

Here’s screenshot of what the video will look like:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

 

 

 

 

Click HERE for the Backtest Video ​