Options and backtesting made simple — from calls/puts to 0DTE and settlement differences.
An option is the right to buy or sell at a set price (strike) until a set date (expiry). A call is the right to buy; a put is the right to sell.
Greeks measure how sensitive an option price is to each factor: delta=direction, theta=time, gamma=acceleration, vega=volatility.
Buyers pay the ask (higher), sellers receive the bid (lower). That gap (the spread) is your real trading cost.
SPXW is European and cash-settled (exercise only at expiry, settle in cash); SPY is American and physically settled (exercise anytime, deliver shares).
A credit spread sells a near option and buys a far one to collect net premium. 0DTE expires the same day, so both reward and risk come fast.
Sell a put to take on the obligation to buy at a chosen price, collecting premium. If assigned, you buy the stock there, but the premium lowers your real cost basis.
Sell a call against 100 shares you hold to collect premium. The premium cushions small drops, but upside is capped at the strike if the stock rallies.
Win rate is “how often you win”; expectancy is “average P&L per trade.” A 90% win rate still loses long-term if expectancy is negative.