@Shay, great work backtesting and sharing the results (and the follow ups). Do you have a way of calculating the initial margin requirements (reg t or portfolio margin) on the day of trade entry? That would be a good data point as well, especially when you want to calculate the $$$ return. Or is that the BPE (buying power e...xposure)?
Not opining on whether zdreg is on or off topic but he asked a fair question (albeit obliquely). The edge in systematic index option selling comes from the negative volatility risk premium (VRP) that has persisted for decades now in index products. There are several papers detailing this, as did the Thinkorswim (TOS) research team in many of their "Market Measures" segments which are searchable for free in their archives. Also, Google "options volatility risk premium" and a ton of papers will show up on this. I'm surprised it has persisted this long myself but that's another topic. Stocks have a positive risk premium, meaning you get (well) compensated for taking on the risk of owning stocks versus Treasuries and theory and practice both agree here. The opposite holds for long index options. There is a negative risk premium relative to the risk free rate and before you say "of, course! Its insurance!" let me say that in a no-arbitrage (and hypothetically friction-less cost) world, there should be a positive, not negative premium and that's the basis of index option selling. The institutional investing world is mostly long-only hence there are real world departures from theory (many more than I just described). The TOS research team skims over risk management. There are extreme tail risks to the strategy that can be addressed with appropriate hedging and very short term volatility prediction - yes volatility be quite well predicted over 1-5 days quite well. This is a different game than market making in general but at short time frames when fear is high, us traders become quasi-market makers while they get capital constrained and risk-averse, so there is some overlap.
sysdevel99 - yes, the BPE is the margin (regular). Max BPE - 4671$ Avg BPE - 3511$ PnL per day - 2.13$ ROC (for all the period) - 119% ROC per day (0.04%) i prefer to look at "ROC Per Day" and not just the "ROC", because then you can compare system that run 2 years with system that run 4 years