ET Reddit Mentions | ChartExchange

I've been developing a rules-based, fully automated intraday options strategy on IWM (ATM strike, 0DTE). Everything is discretion-less — signals, sizing, entries, exits. Before going live I wanted to share the testing process and get feedback on concerns I may have missed.
I'm not sharing the specific signal logic — not because I think it's proprietary forever, but because I want honest reactions to the *testing process*, not the strategy itself.
**The Setup**
  \- Intraday, 0DTE options on IWM
  \- ATM strike (\~$0.60 avg premium)
  \- \~2 signals per day during RTH
  \- 4-level scaled exit (equal-weight across 4 TP tiers at 1×, 2×, 3×, 4× ATR from entry)
  \- ATR-based stop loss
  \- Fully automated execution via Alpaca
**5-Year SIP Backtest (2021–2026)**
Ran on 5 years of SIP 1-minute bars (533k+ bars). All parameters set once, never touched between years.
  ┌────────────────────────┬────────┐
  │ Metric │ IWM │
  ├────────────────────────┼────────┤
  │ Total signals │ \~2,900 │
  ├────────────────────────┼────────┤
  │ Signals/day │ \~1.9 │
  ├────────────────────────┼────────┤
  │ Win Rate (≥TP1) │ 55.5% │
  ├────────────────────────┼────────┤
  │ TP4 rate │ 24.3% │
  ├────────────────────────┼────────┤
  │ SL rate │ 44.8% │
  ├────────────────────────┼────────┤
  │ Conditional P(TP2|TP1) │ 84.9% │
  ├────────────────────────┼────────┤
  │ Conditional P(TP4|TP3) │ 86.1% │
  └────────────────────────┴────────┘
  "Win" = price reached TP1 before the stop. Not P&L.
The cascade structure is what makes this viable at 55% WR: once TP1 hits, the probability of reaching TP2+ is high, so the average winner is meaningfully larger than the average loser.
**Walk Forward Analysis (Year-by-Year, Same Fixed Parameters)**
Each calendar year is a true independent hold-out. Parameters are never re-fit per year.
  ┌────────────────┬───────┬───────┬───────┬─────────┐
  │ Year │ n │ WR │ TP4% │ sig/day │
  ├────────────────┼───────┼───────┼───────┼─────────┤
  │ 2021 │ 288 │ 53.5% │ 26.4% │ 1.14 │
  ├────────────────┼───────┼───────┼───────┼─────────┤
  │ 2022 │ 466 │ 54.5% │ 25.3% │ 1.85 │
  ├────────────────┼───────┼───────┼───────┼─────────┤
  │ 2023 │ 528 │ 54.0% │ 24.1% │ 2.10 │
  ├────────────────┼───────┼───────┼───────┼─────────┤
  │ 2024 │ 578 │ 51.6% │ 23.5% │ 2.29 │
  ├────────────────┼───────┼───────┼───────┼─────────┤
  │ 2025 │ 774 │ 53.0% │ 25.6% │ 3.07 │
  ├────────────────┼───────┼───────┼───────┼─────────┤
  │ 2026 (partial) │ 284 │ 53.5% │ 19.0% │ 1.13 │
  ├────────────────┼───────┼───────┼───────┼─────────┤
  │ **All** │ **2,918** │ **53.2%** │ **24.3%** │ **1.93** │
  └────────────────┴───────┴───────┴───────┴─────────┘
Range: 51.6–54.5% (2.9pp spread). The strategy ran through COVID recovery (2021), the 2022 bear market, the 2023 sideways grind, and the 2024–2025 bull run without a year below 51.5%. CALL WR ≈ PUT WR within \~2pp every year.
**Paper Test 1 (PT1): Apr 27 – Jun 2, 2026**
39 live trades. **WR: 38.5%.** This was bad. Same-period backtest showed 51.7% — an 11pp gap.                                                                                                                                                                                                                                                                                                                         We ran a full forensic audit at the signal level: matched every paper trade to its corresponding backtest signal, classified every discrepancy, and went through bot logs line by line. Key findings:
  \- **Only 2 true execution misses** (signals the backtest fired that the bot silently skipped due to a warmup bug). IWM was the cleanest of the three tickers we were running.
  \- The 38.5% WR on 39 trades is a small-sample/regime result, not an execution bug. At n=39, a 53% true WR strategy has a 5% chance of delivering ≤38% by random variation alone.
  \- The specific 6-week window overlapped with an anomalously choppy market regime — same-period backtest was already 51.7%, not 55.5%.
  \- A warmup bug on Days 1–2 affected signal detection initially. Fixed before paper test 2.
We took PT1 seriously and did not dismiss it. We sat on it for two weeks, ran external AI reviews, and only moved to PT2 after the forensic audit confirmed no systematic logic bug.
**What We Fixed Between PT1 and PT2**
  \- Warmup RTH-filter bug (bot starting cold on Day 1) — fixed
  \- Added CLOSE\_STRONG filter (+0.12 EV, 70% signals kept per backtest)
  \- Raised MIN\_BODY\_ATR threshold (removed weak-momentum signals)
  \- Blocked LOW\_BODY signals (confirmed negative EV in backtest, kept in PT1)
  \- Switched to Phase 2 resting limit orders (4 resting limits placed at entry via BS pricing, vs. market sell on TP hit in PT1)
  \- Implemented trailing stop on the 4th tranche after TP3 hit (0.5×ATR trail distance)
  \- EOD hard close at 3:00 PM ET with limit cancellation
  \- Pre-registered the strategy config in git before PT2 started (commit hash locked)
**Paper Test 2 (PT2): Jun 4 – Jun 15, 2026**
28 live trades, 8 trading sessions. **WR: 71.4%.**
Canonical backtest over the same exact window: **72.2%.**                                                                                                                                                                                                                                                                                                                  Gap: **−0.8pp.** Essentially perfect convergence.
This was the validation we needed — not that 71.4% is the "real" long-run WR (small sample, favorable period), but that the execution infrastructure was correctly reproducing backtest signals with no systematic distortion.
**Monte Carlo Projections ($10k)**
After locking the backtest WR and payoff distributions, I ran a Monte Carlo simulation to understand the range of outcomes. The model uses a 9-outcome probability structure (pure SL, TP1→SL, TP1→EOD,
TP2→SL, TP2→EOD, TP3→SL, TP3→EOD, TP4, OPEN→EOD) with per-outcome return means calibrated from 5yr SIP data. The current version (v12) runs daily loss limits and consecutive-SL halts inside each simulated path, not as a flat signal-rate discount — so bad streaks produce the same early session shutoffs they would in the live bot.
5,000 simulations, 4-year horizon, starting at $10k:

  ┌───────────────────────────┬──────────────────┐
  │ Metric │ IWM $10k │
  ├───────────────────────────┼──────────────────┤
  │ Ruin (account → $0) │ 0.0% │
  ├───────────────────────────┼──────────────────┤
  │ Median balance, Year 1 │ \~$62k │
  ├───────────────────────────┼──────────────────┤
  │ Median balance, Year 4 │ \~$271k │
  ├───────────────────────────┼──────────────────┤
  │ P(reach $100k within 4yr) │ 99.6% │
  ├───────────────────────────┼──────────────────┤
  │ Median days to $100k │ 372 (\~17 months) │
  └───────────────────────────┴──────────────────┘
**I expect this section to get roasted, and I want it to.** The obvious objections:
  1. **Compounding assumes the edge holds indefinitely at scale.** The model doesn't account for what happens when position sizes grow large enough to affect fills, or when the contract cap (100 contracts max) starts biting repeatedly.
  2. **The WR input is from a 5-year backtest.** If the true live WR is 48% instead of 55%, the projections collapse entirely. The model is extremely sensitive to WR — 3pp lower means roughly half the median yr4 balance.
  3. **Payoff distributions are from 2yr Alpaca data**, not from live options fills. Theta decay, bid-ask at TP trigger, and slippage during fast moves aren't fully priced in. They affect P&L per trade but not WR, so the kill criteria (WR-based) won't catch this directly.
  4. **Signal rate live < backtest.** The model uses backtest signal rates (\~1.9/day for IWM). DLL and CONSEC\_SL halts reduce this, and v12 does account for that — but option liquidity filters and real-world entry delays reduce it further in ways the model doesn't capture.
**Going Live — Plan and Kill Criteria**
Currently running Paper Test 3 (started June 16) with a fresh $10k account, V7 config frozen, to accumulate a third clean block of paper data before the live switch.
**I'm actively debating whether to shorten or skip PT3 entirely.** PT2 delivered −0.8pp vs. the same-period canonical backtest on 28 trades — essentially the tightest possible confirmation that execution is correct. At some point, additional paper testing has diminishing returns: it delays real compounding, and if the strategy is going to fail live, it's more likely to show up in the actual P&L distribution over time than in another 120 paper signals that are fundamentally testing the same infrastructure already validated in PT2.
The argument for skipping: execution is confirmed, kill criteria are pre-defined, starting capital ($10k) is a recoverable loss, and the strategy has pre-registered parameters in git. The argument against: PT2 was a favorable 8-session window — a third test through different regime conditions would give more confidence in regime stability before real money is on the line.
**Pre-defined kill criteria (hard stops for the live account):**
  \- Hard kill if WR < 44% at the 120-trade checkpoint
  \- Rolling alarm if 120-trade rolling WR < 36.7% (5% false-alarm rate at ρ=0.85 signal correlation)
  \- PF is a soft watch only — the asymmetric exit structure inflates PF relative to WR, making it a noisy signal at small n
The 44% hard kill is set deliberately conservative. At the 55% backtest WR, a sequence of 120 trades has a <0.5% chance of landing below 44% by random variation. If we hit it, we stop and investigate.
Live account: $10k, ATM IWM options, same V7 config. Allocation TBD after recalibrating MC with real premium/fill data from paper testing.
**What I'm Looking For**
We've done: 5yr backtest, year-by-year WFA, intrabar stress test (0.5% ambiguity rate), Monte Carlo (5,000 sims, ruin=0%), two paper tests with signal-level forensic audit, and external reviews.
What concerns would you raise that we haven't addressed? What would make you not go live here, or what would you want to see that's missing?
Specific things I'm uncertain about:
  1. Is the 51.6–54.5% WFA range meaningful enough to justify the trading costs and friction of live options?
  2. We haven't paper-tested through a high-volatility regime (VIX > 30 sustained). The 2022 backtest numbers look fine, but backtest fill assumptions vs. live during an actual vol event could diverge significantly.
  3. Our PT2 sample size is 28 trades — clean results, but still small. We're treating PT3 as the real validation gate. Is there a better way to stage this?
  4. Given PT2 IWM nearly perfectly matched the canonical backtest (−0.8pp on 28 trades), is there a principled reason to keep paper testing rather than just going live with tight kill criteria? Or is "more paper" always the right answer here?
  5. The MC shows 0.0% ruin and $271k median yr4 from a $10k start. Obviously this depends entirely on the backtest WR being real — but are there structural problems with the model itself that would change the shape of outcomes, not just the magnitude?

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