SPY Weekly Cash Secured Puts (2025): Did We Beat Buy & Hold?

The Experiment

Following our TSLA study, we turned our backtesting engine to the S&P 500 (SPY). We simulated a total of 250 trades (50 weeks x 5 delta levels) throughout 2025.

The market context is crucial: SPY had a strong year, rising 15.4% from $591 to $683. In such a bullish environment, capped-upside strategies like CSPs face a tough challenge.

The Results: Performance by Delta

Unlike TSLA, where -0.3 Delta was the clear winner, SPY showed a linear relationship: more risk (-0.5 Delta) equaled more reward ($5,884).

However, even the most aggressive -0.5 Delta strategy (9.5% return) failed to match the underlying index's 15.4% gain. This illustrates the "opportunity cost" of selling puts in a strong uptrend.

Equity Curve Analysis

The equity curves show a smooth, steady ascent for the low-delta strategies. The -0.1 Delta (Blue) curve is almost a straight line, reflecting its incredible 96% win rate.

The -0.5 Delta (Purple), while ending higher, suffered significant volatility during market dips in March and April.

The "Profit vs. Pain" Ratio

Even the safest -0.1 Delta strategy had a drawdown of $215, which is negligible compared to its $3,316 profit. This makes it an incredibly low-stress income generator.

However, as you chase yield, the pain increases. The -0.5 Delta strategy suffered a $4,711 drawdown to make $5,884. While still profitable, the "sleep factor" is significantly worse.

The Hidden Trap: Avg Win vs. Avg Loss

While -0.1 Delta had a 96% win rate, its average loss ($-108) was larger than its average win ($74). However, this ratio (1.5x) is much healthier than typical "steamroller" strategies.

The -0.5 Delta strategy had an Average Win of $431 and Average Loss of $-874 (2x ratio). You need to win twice just to cover one loss.

The "Headache" Factor: Assignment Frequency

This is a major selling point for the -0.1 Delta strategy: you were assigned only 2 times in the entire year. It is a near-passive income stream.

The -0.5 Delta strategy required managing assigned stock 17 times (34% of the year). If you want to avoid the hassle of wheeling, stay below -0.2 Delta.

Efficiency: Premium Capture Rate

This is where -0.1 Delta shines. It retained a massive 89.5% of all premiums collected. You keep almost everything you sell.

The -0.5 Delta strategy collected $23,943 in premiums but gave back nearly $18,000 in losses, retaining only 24.6%. It is a high-churn strategy with low efficiency.

The Bottom Line: ROI vs. Buy & Hold

Here is the harsh reality of 2025: Simple Buy & Hold (15.4%) beat every single Put Selling strategy.

The best performing CSP (-0.5 Delta) only returned 9.5%. This confirms that in a strong bull market, capping your upside with options is a drag on performance. CSPs are for income and stability, not for maximum total return in a rally.

Sleep Quality: Income Volatility

If you hate volatility, the -0.1 Delta strategy is a dream. Its weekly standard deviation was only $50. You barely felt the market ups and downs.

The -0.5 Delta strategy had a weekly volatility of $654 (13x higher!). While it made more money in the end, the ride was significantly bumpier.

Psychological Resilience: Win/Loss Streaks

The -0.1 Delta strategy enjoyed a massive 40-week winning streak. Imagine going nearly the entire year without a realized loss. That is psychologically very easy to stick with.

The higher delta strategies had much shorter winning streaks (8-11 weeks) and slightly longer losing streaks, testing your patience more frequently.

The Verdict: Strategy Scorecard

1. The "Smart" Income (-0.1 Delta): If you want a savings account replacement that yields 5.5% with 96% win rate and almost zero drawdown, this is it.

2. The "Aggressive Yield" (-0.5 Delta): Highest dollar return ($5,884) but with high volatility ($654 std dev). Only for active traders.

3. The "Real Winner" (Buy & Hold): In a 15%+ bull year, don't overcomplicate it. Just own the index.