STRATEGIES

QQQ Big-Move Overnight Strangle — "What If"

What If We Bought an Overnight Strangle Before the Big Move?

On days QQQ moved more than 3% close-to-close, the move was obvious in hindsight but the direction was unknown at the prior day's close. This backtest asks: if we had bought an OTM call + OTM put strangle (a direction-neutral bet) at the prior day's close, which OTM distance would have paid the most?

Trigger: QQQ close-to-close move ≥ 2.9% (found 2 days in available history)
Entry: EOD of the PRIOR trading day — last snapshot of the 1-DTE chain
Position: Buy 1 OTM call + 1 OTM put (strangle) at the same % OTM distance
Expiry: 1 DTE — options settle to intrinsic at the move day's close
Sizing: $1,000 per strangle — contracts = floor($1,000 / (debit × 100))
Distances tested: 0% (ATM), 1%, 1.5%, 2%, 2.5%, 3%, 3.5%, 4%, 5% OTM

VERDICT — WHICH OTM DISTANCE WINS?

ANSWER

DAY-BY-DAY BREAKDOWN

Disclaimer: Historical backtest using database marks (last snapshot of the prior day). Real fills are subject to spreads and liquidity — 1 DTE deep-OTM options have wide bid/ask. 1 DTE options expire at 4:00 PM close; P/L uses intrinsic value at that close. This scenario captures ONLY days that did move big; it says nothing about days that looked similar but stayed flat (and where the strangle would have lost 100%).