Cash-Secured Put Backtest: 5 Years of Getting Paid to Wait

The Test Setup

Results by Ticker

The shape mirrors the covered-call backtest almost exactly — which it should, because a cash-secured put and a covered call at the same strike are synthetically equivalent. The small CSP edge on SPY (+53% vs the covered call's +52%) comes from put skew: downside puts carry slightly richer IV than equidistant calls, so the put seller collects marginally more premium for the same risk.

The KO row is the quiet winner: a boring, low-IV defensive where the CSP beat buy-and-hold outright. On slow movers, premium income is a larger share of total return and the upside you forgo is small.

Win Rate by Short-Put Delta

Same SPY 5-year run, varied only by the short-put delta:

16-delta looks safest but leaks yield — the premium is too thin to compound meaningfully. 50-delta (ATM) collects the most premium but you're assigned more often than not, turning an income strategy into serial stock ownership at whatever price the market hands you. 30-delta is the sweet spot: roughly two-thirds of cycles win, assignment is frequent enough to matter but rare enough to manage, and the Sharpe ratio peaks.

Performance by IV-Rank Regime

The same 30-delta SPY setup, segmented by IV rank at entry. The pattern matches every other premium-selling backtest on this site: the middle pays, the extremes don't.

Selling puts when IV rank is above 70 feels lucrative — the credits are enormous — but those entries cluster in early-stage selloffs, and assignment arrives while the underlying is still falling. The moderate 20-40 IV-rank band is where the strategy compounds quietly.

Drawdown Analysis: The 2022 Bear Year

A cash-secured put has nearly the full downside of the stock below the strike. 2022 made that explicit:

Maximum peak-to-trough drawdown over the full sample was -14% for the CSP portfolio vs -22% for buy-and-hold. The mechanics of the 2022 stair-step: assigned in February near the highs, sold at the next open for a loss, re-sold puts lower, assigned again in June, repeated. Each assignment realised a loss, but each new put was sold at progressively higher IV — the fattening premium is what kept the CSP 7 points ahead of the index.

The same conclusion as the covered-call backtest: premium selling against long exposure is a defensive overlay, not a hedge. It cushions bear markets and lags bull markets.

The Assignment-Handling Effect

Roughly 30% of 30-delta cycles end in assignment. What you do next is worth more than strike selection. Three policies, same entries:

The wheel's +41% matches the wheel backtest — this is the same trade viewed from the put side. The wheel gives up roughly 12 points of return for a marginally smoother curve, because covered calls written against post-assignment shares are struck below your cost basis and cap the very rally you need.

The worst policy is the most popular: holding assigned shares uncovered and "waiting to get back to even." It nearly doubles the drawdown and idles the cash that should be selling the next put. If you wouldn't buy the stock today at the assigned basis, the backtest says: sell it and move on.

Common Mistakes

• Selling puts on stocks you don't want to own. Assignment is a feature of the strategy, not a failure mode. If owning 100 shares at the strike would upset you, the strike is wrong or the ticker is.
• Chasing IV-rank-90 premium. The richest credits cluster at the start of declines. The over-70 bucket was the only net-loser regime in the sample.
• Holding losers past 21 DTE. The last three weeks are gamma territory — small moves swing the position hard. Rolling at 21 DTE kept the loss distribution tight.
• Sizing to premium instead of strike value. One contract secures 100 × strike in cash. The premium is the yield on that capital, not the capital at risk.
• Freezing after assignment. Dead shares earn nothing. Pick a policy — sell and resume, or wheel into covered calls — before the assignment happens, not after.

Five Takeaways

1. Default to 30-delta short puts, 30-45 DTE. Best Sharpe-ratio outcome in the sample; 16-delta is too thin, ATM is stock-buying with extra steps.
2. Close at 50% of max profit or roll at 21 DTE. The same management rule that works across every premium-selling backtest on this site.
3. Sell into the IV-rank 20-40 band. Below 20 the premium is dead money; above 70 the assignments land mid-decline.
4. Decide your assignment policy in advance. Sell-and-resume kept the most return; wheeling smooths income; holding uncovered was the worst of both.
5. Treat CSPs as covered calls in disguise. Same payoff, same regime behavior: cushions bears, lags bulls. Size it like long stock exposure, because it is.

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