SteadyOptions is an options trading forum where you can find solutions from top options traders. TRY IT FREE!

We’ve all been there… researching options strategies and unable to find the answers we’re looking for. SteadyOptions has your solution.

SPY Short Puts vs. Put Spreads

In this article I’ll be using the ORATS Wheel backtesting tool to compare the performance since 2007 of SPY short puts versus short put spreads. I’ll look at both risk and returns, and different ways of determining position size to adjust for the differences in risk between the two trades.

Short put results

Since 2007 30 DTE 40 delta SPY short puts held until expiration sized at 100% notional (i.e., cash secured) have had the following results: 

  • Average return: 6.85%
  • Annual volatility: 9.1%
  • Max Drawdown: 36.5%
  • Sharpe Ratio: 0.75

81.7% of trades were winners.


Short put spread results

Since 2007 30 DTE 40/30 delta SPY short put spreads held until expiration sized at 100% notional (same position size as the short put) have had an average annual return of 1.1% per year with an annual volatility of 2.4%. The max drawdown was 11.1%. 76.1% of trades were winners.


The results show that short puts have had both higher returns as well as higher risk adjusted returns than short put spreads. The long put associated with the short put spread has a negative impact on both absolute returns and risk adjusted returns. For example, if we calculate Sharpe Ratio as average return divided by annual volatility, we get 0.64 for the short put and 0.46 for the short put spread. To adjust the put spread to have comparable risk as the short put, you could sell 4 put spreads per 1 short put. What do those historical results look like?


Short Put Spread sized at 4x notional (4 put spreads per 1 short put)

  • Average return: 4.5%
  • Annual volatility: 9.6%
  • Max Drawdown: 43.6%
  • Sharpe Ratio: 0.46

The short put spread increased in position size to have similar annual volatility as the short put still has worse risk adjusted returns. This is the price to pay for a defined risk trade, and makes sense when we think of put options as the equivalent of insurance. When we spread off a short put with the purchase of a long put, we’re adding an insurance like position to our trade that caps how much money we can potentially lose. Over time, the expected return of that insurance is negative.  For this reason, I personally prefer the simplicity of the short put over the added complexity, slippage, and commissions of the put spread. The same is true when we add calls where I personally prefer short strangles over iron condors.


If we compare credits received, I find the following as of April 21st 2021 when I look at SPY options expiring 30 days from now.

  • 40 delta put (strike: 411): $5.37
  • 30 delta put (strike: 405): $3.88

A short put would collect $5.37 of premium, while the 40/30 delta put spread would collect $1.49. 4 contracts of the spread would collect $5.96, which is slightly more than the short put. This fact may entice traders without access to backtesting to prefer the put spread. One additional consideration is the strike selection of the long put in the put spread, and my testing in ORATS shows that risk adjusted results get worse the closer the long put is to the short put. This makes sense, as the farther away the long put is the less impact it has on the trade.



Traders often wonder if it makes more financial sense to trade a short put or more contracts of a short put spread. ORATS backtesting data indicates that short puts have higher risk adjusted returns than short put spreads. I’ve found this result to be robust to multiple underlying symbols in addition to SPY. If you’re trading in a small account a short put spread can still make sense as a way to control your exposure since a short put will always require more capital than a put spread, but as your account grows to a point where you have enough capital to trade short puts your expected risk adjusted returns will improve with a short put. This is why we use the short put as our preferred option trade in the Steady PutWrite Strategy. It is both simple and effective over the long term.


Jesse Blom is a licensed investment advisor and Vice President of Lorintine Capital, LP. He provides investment advice to clients all over the United States and around the world. Jesse has been in financial services since 2008 and is a CERTIFIED FINANCIAL PLANNER™ professional. Working with a CFP® professional represents the highest standard of financial planning advice. Jesse has a Bachelor of Science in Finance from Oral Roberts University.

What Is SteadyOptions?

Full Trading Plan

Complete Portfolio Approach

Diversified Options Strategies

Exclusive Community Forum

Steady And Consistent Gains

High Quality Education

Risk Management, Portfolio Size

Performance based on real fills

Try It Free

Non-directional Options Strategies

10-15 trade Ideas Per Month

Targets 5-7% Monthly Net Return

Visit our Education Center

Recent Articles


  • How To Create Your Own Indexed Annuity

    Indexed annuities are a life insurance company product sold by insurance brokers for a commission that is based on the amount deposited into the contract. Contract performance is linked to popular indexes like S&P 500, and early withdrawal penalties typically apply for the first 7-10 years if withdrawals greater than 10% of the contract value are taken each year.

    By Jesse,

  • Q&A with Mental Game Coach Jared Tendler

    QUESTION: Thank you for taking the time to participate in a Q & A session with Steady Option. Let’s start with an introduction and a little bit of background on who you are and how you got here.

    By Jared Tendler,

  • Using TLT Options to Increase Expected Returns of a Buy & Hold Portfolio

    TLT is the iShares 20+ Year Treasury Bond ETF that seeks to track the investment results of an index composed of U.S. Treasury bonds with remaining maturities greater than twenty years. Even though US Treasuries typically act as a diversifying asset class to mainstream equities, many investors with long time horizons may not be interested in holding TLT in their portfolio because it would lower expected returns.

    By Jesse,

  • Tax Efficient Trading Part II: Capital Gains Deferral

    In part I I illustrated how the preferential tax treatment of 1256 contracts could improve after tax returns of a PutWrite strategy over a long period of time. In this article, I’ll continue the illustration by switching from a PutWrite to an ETF BuyWrite (covered calls) strategy while holding pre-tax expected returns constant at 8%.

    By Jesse,

  • Tax Efficient Trading Part I: The 1256 Contracts

    Cash settled index options like SPX, XSP, RUT and a few others receive special federal tax treatment where 60% of the gains are reported as a Long Term Capital Gain (LTCG) even if the contract was held for less than a year.

    By Jesse,

  • SPY Short Puts vs. Put Spreads

    In this article I’ll be using the ORATS Wheel backtesting tool to compare the performance since 2007 of SPY short puts versus short put spreads. I’ll look at both risk and returns, and different ways of determining position size to adjust for the differences in risk between the two trades.

    By Jesse,

    • 1 comment
  • Signs that you Are Ready to Start Investing

    If you want to build your wealth, you have to make sure that you invest your money. If you put money into a savings account and don’t earn any interest from it, this won’t work for you in the long term. Your money will lose value because of inflation, and this is the last thing that you need. So when do you invest?

    By Kim,

  • One Year of Diversified leveraged Anchor

    I almost hate to keep saying it, but the Diversified Leveraged Anchor strategy keeps exceeding expectations and performing as designed. To remind our readers, Diversified Leveraged Anchor was created in April 2020 attempting to further increase performance, reduce risk, and to reduce volatility. 

    By cwelsh,

  • Should I Pay Off My Mortgage Early Or Invest?

    Paying off a home mortgage early is a popular financial goal. Most people feel a level financial peace when their home is paid off that is beneficial in many ways. The most common approach to paying off the mortgage early is directly making additional principal payments to the lender on a regular basis.

    By Jesse,

  • Option Order Execution Tips

    As a community of option traders, we all can relate to the occasional challenges of order execution. Best practices for avoiding errors as well as techniques for better potential execution will be the focus of this article.  Like countless others in the Steady Options community, I personally have traded thousands of option contracts over the last decade.

    By Jesse,


  Report Article

We want to hear from you!

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account. It's easy and free!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

Options Trading Blogs Expertido