STUDY 2

Taking profit at 50% looked safe. It cut P&L by ~81%.

“Take profits at 50%” is the most repeated rule in options. In this test it was the weakest variant.

Hypothetical backtest. SPX 0DTE 25-wide put credit spread, 1 contract, Jan 2015 – Oct 12 2026 (2,960 trading days). Black-Scholes model prices from daily ^GSPC + ^VIX bars, put IV = VIX × 1.25, $0.65/leg fees, $0.15 slippage on stop exits. Daily bars: any touch of the stop counts as a stop, no gaps, no intraday path. Use for relative comparison only, not expected P&L.

Results ($ per 1 contract)

$1.075 credit, 2× stop	Win%	Avg win	Avg loss	Max DD	Total	Exp/trade
Hold to expiry	85%	113	-131	1,080	228,414	77.17
50% take-profit	85%	40	-131	2,272	42,686	14.42
25% take-profit	85%	11	-131	30,123	-29,624	-10.01

Why it hurts

The win rate is 85% either way because the losing days are unchanged (avg −131). But the average win shrinks from 113 to about 40. You keep every full-size loss and give up most of each win.

Stress periods ($)

Rule	Feb 2018	Q4 2018	Mar 2020	2022	Aug 2024	Apr 2025
Hold	+1,023	+590	+117	+13,208	+206	+78
50% take-profit	-171	-2,069	-1,217	-321	-354	-553

Honest footnote: under an “optimistic” ordering (the take-profit fills before any stop touch), 50% TP looks flawless (117k, no drawdown). Daily bars can’t tell which came first, so treat that as an upper bound. The table above uses the adverse ordering.

Bonus: the $0.05 close

Instead of a take-profit, place a GTC buy-to-close at $0.05 right after the fill (alongside the 2× stop). In the model it gives up ~2% of P&L versus holding. In exchange it frees buying power and removes pin, assignment and settlement risk near the close.

2× stop +	Win%	Avg win	Max DD	Total	Exp/trade	Close filled
Hold	85%	113	1,080	228k	77	-
$0.05 close	85%	112	1,086	224k	76	23%
$0.10 close	85%	109	1,091	217k	73	34%

Conservative fill model: the adverse move comes first, and the close can fill only in the last ~2 hours. $0.10 costs more than $0.05, so $0.05 is the better of the two.

Get one study a week

Plain-English backtests. No signals, no hype. Free rule card when you join.

Opens our Beehiiv signup page to confirm. Or subscribe free on Beehiiv. Unsubscribe anytime.