Discover the most profitable SPY options strategies during Middle East conflict events. Backtested data reveals how calls and puts perform after geopolitical shocks—and how traders can use delta, DTE, and diagonals to trade smarter.
Israel Strikes Iran: Headlines Shake Markets Overnight
Late Sunday evening, headlines broke that Israel had conducted precision strikes inside Iranian territory, escalating tensions in a region already on edge. Overnight futures on the S&P 500 dropped sharply, oil prices spiked, and risk-off sentiment surged across global markets. Traders woke up Monday facing a familiar but uncertain environment: geopolitical shock, elevated volatility, and the potential for a major market move.
But history may be the best guide for these moments.
What Are the Best Option Strategies During Times of Conflict?
When tensions rise in the Middle East, markets often react swiftly—and emotionally. But do those reactions create opportunities? And if so, are there repeatable, data-driven options strategies traders can use?
We explored this by running a simulation based on historical data. The goal: understand how SPY options performed on the first U.S. trading session following key Middle East conflicts since 2016—and identify the most profitable strategies.
Methodology
To answer this question, we used the following approach:
- Identify conflict events involving Middle East tensions since June 2016 and record the first U.S. trading session after each.
- On each of those days, simulate buying SPY call and put options with the following setups:
- DTE (Days to Expiration): 1, 4, 7, 14, 28, 42
- Delta: 10, 30, 50, 70
- Hold all positions to expiration and calculate PNL by settling the option to cash based on SPY’s closing price on expiration day.
- Aggregate average PNLs across all events by DTE and delta, separated by calls and puts.
- Identify the best performing combinations—both from the long (buying) and short (selling) side.
Middle East Conflict Dates Analyzed
We included the following key geopolitical events in our analysis:
- 2016-10-17: Battle of Mosul begins
- 2017-06-05: Gulf States cut ties with Qatar
- 2018-05-08: U.S. exits Iran nuclear deal
- 2019-06-13: Oil tankers attacked in Gulf of Oman
- 2019-09-14: Drone strike on Saudi Aramco
- 2020-01-03: U.S. kills Iranian General Soleimani
- 2020-01-08: Iran missile retaliation
- 2021-05-10: Israel–Gaza conflict begins
- 2022-09-16: Iran protests following Mahsa Amini’s death
- 2023-10-07: Hamas surprise attack on Israel
- 2024-01-12: Houthi attacks escalate in Red Sea
Results and Strategic Insights
🛡️ 1. Put Selling Strategies Tend to Outperform
The data shows that selling puts after geopolitical shocks—especially short-dated, out-of-the-money puts—is historically profitable. This suggests that initial fear-driven price drops are typically short-lived, creating strong mean reversion opportunities.
Key takeaway: Traders could consider short puts or put spreads to capitalize on overestimated downside risk.
📈 2. Long-Term Call Buying Reflects Return to Trend
While the near-term can be volatile, SPY has a tendency to revert back to its long-term bullish trend. Longer-dated call options (28–42 DTE) with 30–50 delta had consistently positive average PNLs, making them excellent directional bets during uncertainty.
Key takeaway: Consider long-dated call options when markets react strongly to conflict headlines.
🔁 3. Diagonal Call Structures Maximize Profitability
One of the most effective combinations observed was a call diagonal spread:
- Sell short-dated OTM calls (1–4 DTE, 10–30 delta) to capture premium in elevated IV
- Buy longer-dated ATM or slightly ITM calls (7+ DTE, 30–50 delta) to position for recovery
This structure takes advantage of inflated short-term premiums while keeping directional upside exposure.
Key takeaway: A conflict event often inflates near-term IV—sell it short, buy time for recovery.
Conclusion: Be Data-Driven, Not Emotional
Markets are emotional during moments of geopolitical stress—but that emotion often creates opportunity. History suggests that selling fear and buying time is a strong strategic foundation during Middle East conflicts. Whether you're a directional trader or an income-focused strategist, using historical analysis through tools like Aion Finance can help you stay objective, strategic, and ultimately more profitable.
Want to analyze strategies like this for future events?
👉 Explore Aion Finance and run your own backtests with our customizable options engine.
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