BYOB: Max/Min Target Premium as Percentage (%) of SPX
L
Luigi M
Currently, BYOB allows users to select a Target Premium (Min/Max) only as a fixed dollar value (e.g., $3.00). While this works for short-term backtests, it creates significant distortion when backtesting over longer periods where the underlying asset (e.g., SPX) has experienced substantial capital appreciation.
The Problem: A fixed premium target does not account for the changing value of the underlying index over time. Examples:
- Selling a $3.00 premium on SPX in 2020 (when SPX was ~3,000) represents a yield of roughly 0.1%.
- Selling that same $3.00 premium in 2025 (when SPX is ~6,000) represents a yield of roughly 0.05%.
Using a fixed dollar amount forces the strategy to take different risk/reward profiles depending on the year, skewing the backtest results unless the user manually segments the data and adjusts the premium year-by-year.
Proposed Solution: Please add an option to define the Target Premium as a Percentage of the Underlying Price (e.g., SPX). A toggle or separate field to input a percentage (e.g., 0.05%) would probably be enough.
Calculation Logic: The system would calculate the dollar target dynamically based on the underlying price at the start of the trading day (or the previous day's close) to avoid look-ahead bias. The resulting dollar value should automatically round to the nearest valid tick (e.g., nearest $0.05)
Benefit/Impact: This feature would automatically normalize the premium target relative to the market level. It would allow users to test the concept of a strategy consistently across data without manual intervention, leading to much more robust and realistic backtesting data.