BackAlpha
QQQ (Invesco QQQ Trust) EMA(30)/EMA(50) crossover strategy - with 3.0x leverage via call options
Backtest a QQQ (Invesco QQQ Trust) crossover strategy: it buys when 30-day EMA crosses above 50-day EMA by 1.0% of the stock price, it sells when 30-day EMA falls below 50-day EMA by 1.0% of the stock price. Uses 3.0x leverage via call options with 3.0% annual time decay. Uninvested cash earns 4.0% risk-free interest.
Backtest Assumptions and Key Details
- If the strategy involves regular stock positions, we use the adjusted close price for backtesting. This reflects total return by incorporating dividends.
- If the strategy uses call options to simulate leveraged exposure, we instead use the close price (not adjusted), because dividends are not received when holding options.
- When using call options, we simulate time decay in a simplified way. You can specify a time decay rate (e.g., 3%), which means that if the stock price stays flat for one year, the strategy loses 3% of the current stock price per share of exposure due to decay.
- If leverage is applied via margin borrowing, we enforce a 25% maintenance margin requirement (as set by FINRA). This places a hard cap at 4x leverage, beyond which a margin call is immediate. In practice, 3x leverage is the more realistic limit, since the risk of a margin call increases sharply beyond that.
- All trades are assumed to execute at the closing price on the day a signal occurs.
- The backtest includes realistic cash flow effects, such as interest earned on idle cash and borrowing costs incurred when using margin.
Performance Overview
Portfolio Value Trend (Normalized)
Over 26.32 years, portfolio value grew from $10,000.00 to $217,606.01.
Beginning with an initial investment of $10,000.00 on 1999-03-10, the portfolio value reached a value of $217,606.01 by 2025-07-05. This represents a 2,076.06% total gain over 26.32 years, equivalent to 12.41% annualized. This return is moderately above long-term averages. It reflects solid long-term performance and an effective strategy.
Drawdown and Risk
The maximum drawdown recorded during this period was 78.83%. This drawdown began after a peak portfolio value of $43,010.64 on 2000-03-27, and reached its lowest point on 2003-03-11 when the portfolio value fell to $9,107.48. The drawdown lasted for 1079 days.
Maximum Drawdown
Max drawdown: 78.83% over 1079 days.
The drawdown was very large, indicating high sensitivity to adverse market conditions. Strategies with this profile may offer strong upside but require enduring deep declines. The maximum drawdown lasted over two years, reflecting a prolonged period of market weakness or asset-specific decline. Recovery from such drawdowns can be psychologically and financially difficult.
The Calmar Ratio — annualized return divided by maximum drawdown — was 0.16, reflecting the tradeoff between return and volatility. The Calmar Ratio is on the lower side of what's commonly seen in broad-market strategies over extended periods.
What the Strategy Suggests Today
The 30-day EMA is $531.01, and the 50-day EMA is $520.56, for a difference of $10.45. The current stock price is $556.22, and 1.0% of that is $5.56. Since the difference is sufficient and exceeds the threshold, the buy signal is active.
The 30-day EMA is $531.01, and the 50-day EMA is $520.56, for a difference of $10.45. The current stock price is $556.22, and 1.0% of that is $5.56. Since the difference is insufficient and does not exceed the threshold, the sell signal is not active.
If you have been following this strategy, you are currently holding stocks or call options. No sell signal is active. The strategy suggests continuing to hold the current position.
Transaction Timeline
We began our backtest on 1999-03-10 with $10,000.00 starting capital.
On 1999-04-12, the 30-day EMA at $52.89 crossed above the 50-day EMA at $52.28, exceeding it by 1% of the stock price ($55.44). We invested $10,035.50 — which includes $35.50 in interest earned while holding cash for 33 days — gaining exposure to 543.07 equivalent shares.
On 2000-04-24, the 30-day EMA at $98.44 fell below the 50-day EMA at $99.34 by 1% of the stock price ($84.75), triggering our exit. After holding the position for 378 days, we exited leaving $25,019.04 in available cash.
On 2000-07-20, the 30-day EMA at $95.33 crossed above the 50-day EMA at $94.30, exceeding it by 1% of the stock price ($100.38). We invested $25,253.87 — which includes $234.83 in interest earned while holding cash for 87 days — gaining exposure to 754.79 equivalent shares.
On 2000-10-04, the 30-day EMA at $91.59 fell below the 50-day EMA at $92.55 by 1% of the stock price ($85.63), triggering our exit. After holding the position for 76 days, we exited leaving $13,653.36 in available cash.
On 2001-11-20, the 30-day EMA at $36.65 crossed above the 50-day EMA at $36.25, exceeding it by 1% of the stock price ($38.62). We invested $14,270.97 — which includes $617.61 in interest earned while holding cash for 412 days — gaining exposure to 1,108.57 equivalent shares.
On 2002-02-15, the 30-day EMA at $37.85 fell below the 50-day EMA at $38.22 by 1% of the stock price ($35.78), triggering our exit. After holding the position for 87 days, we exited leaving $10,820.14 in available cash.
On 2002-11-08, the 30-day EMA at $24.03 crossed above the 50-day EMA at $23.77, exceeding it by 1% of the stock price ($25.07). We invested $11,133.66 — which includes $313.52 in interest earned while holding cash for 266 days — gaining exposure to 1,332.31 equivalent shares.
On 2004-08-06, the 30-day EMA at $34.94 fell below the 50-day EMA at $35.31 by 1% of the stock price ($32.72), triggering our exit. After holding the position for 637 days, we exited leaving $19,558.78 in available cash.
On 2004-11-05, the 30-day EMA at $36.28 crossed above the 50-day EMA at $35.89, exceeding it by 1% of the stock price ($37.96). We invested $19,750.84 — which includes $192.06 in interest earned while holding cash for 91 days — gaining exposure to 1,560.92 equivalent shares.
On 2005-04-18, the 30-day EMA at $36.44 fell below the 50-day EMA at $36.79 by 1% of the stock price ($34.75), triggering our exit. After holding the position for 164 days, we exited leaving $13,948.62 in available cash.
On 2005-07-27, the 30-day EMA at $38.35 crossed above the 50-day EMA at $37.95, exceeding it by 1% of the stock price ($39.72). We invested $14,099.21 — which includes $150.59 in interest earned while holding cash for 100 days — gaining exposure to 1,064.90 equivalent shares.
On 2006-05-30, the 30-day EMA at $40.39 fell below the 50-day EMA at $40.80 by 1% of the stock price ($38.64), triggering our exit. After holding the position for 307 days, we exited leaving $11,885.06 in available cash.
On 2006-09-28, the 30-day EMA at $39.43 crossed above the 50-day EMA at $39.01, exceeding it by 1% of the stock price ($40.83). We invested $12,040.50 — which includes $155.43 in interest earned while holding cash for 121 days — gaining exposure to 884.68 equivalent shares.
On 2008-01-15, the 30-day EMA at $49.73 fell below the 50-day EMA at $50.25 by 1% of the stock price ($46.55), triggering our exit. After holding the position for 474 days, we exited leaving $15,688.31 in available cash.
On 2008-05-07, the 30-day EMA at $46.49 crossed above the 50-day EMA at $45.98, exceeding it by 1% of the stock price ($48.04). We invested $15,879.83 — which includes $191.53 in interest earned while holding cash for 113 days — gaining exposure to 991.66 equivalent shares.
On 2008-07-22, the 30-day EMA at $45.94 fell below the 50-day EMA at $46.40 by 1% of the stock price ($44.78), triggering our exit. After holding the position for 76 days, we exited leaving $12,353.09 in available cash.
On 2009-04-09, the 30-day EMA at $30.32 crossed above the 50-day EMA at $29.98, exceeding it by 1% of the stock price ($32.94). We invested $12,704.21 — which includes $351.12 in interest earned while holding cash for 261 days — gaining exposure to 1,157.03 equivalent shares.
On 2010-06-09, the 30-day EMA at $46.15 fell below the 50-day EMA at $46.59 by 1% of the stock price ($43.82), triggering our exit. After holding the position for 426 days, we exited leaving $23,955.84 in available cash.
On 2010-09-27, the 30-day EMA at $46.98 crossed above the 50-day EMA at $46.48, exceeding it by 1% of the stock price ($49.39). We invested $24,240.49 — which includes $284.65 in interest earned while holding cash for 110 days — gaining exposure to 1,472.39 equivalent shares.
On 2011-08-17, the 30-day EMA at $55.46 fell below the 50-day EMA at $56.00 by 1% of the stock price ($53.58), triggering our exit. After holding the position for 324 days, we exited leaving $28,477.76 in available cash.
On 2012-01-26, the 30-day EMA at $58.01 crossed above the 50-day EMA at $57.39, exceeding it by 1% of the stock price ($60.22). We invested $28,977.49 — which includes $499.73 in interest earned while holding cash for 162 days — gaining exposure to 1,443.58 equivalent shares.
On 2012-11-15, the 30-day EMA at $65.33 fell below the 50-day EMA at $66.00 by 1% of the stock price ($62.03), triggering our exit. After holding the position for 294 days, we exited leaving $29,497.17 in available cash.
On 2013-05-10, the 30-day EMA at $70.31 crossed above the 50-day EMA at $69.56, exceeding it by 1% of the stock price ($73.05). We invested $30,059.94 — which includes $562.78 in interest earned while holding cash for 176 days — gaining exposure to 1,234.49 equivalent shares.
On 2015-09-04, the 30-day EMA at $106.44 fell below the 50-day EMA at $107.51 by 1% of the stock price ($102.16), triggering our exit. After holding the position for 847 days, we exited leaving $59,597.73 in available cash.
On 2015-11-05, the 30-day EMA at $110.01 crossed above the 50-day EMA at $108.81, exceeding it by 1% of the stock price ($114.71). We invested $59,995.84 — which includes $398.11 in interest earned while holding cash for 62 days — gaining exposure to 1,569.07 equivalent shares.
On 2016-01-19, the 30-day EMA at $108.29 fell below the 50-day EMA at $109.35 by 1% of the stock price ($101.06), triggering our exit. After holding the position for 75 days, we exited leaving $37,482.30 in available cash.
On 2016-08-01, the 30-day EMA at $111.56 crossed above the 50-day EMA at $110.38, exceeding it by 1% of the stock price ($115.84). We invested $38,275.44 — which includes $793.14 in interest earned while holding cash for 195 days — gaining exposure to 991.25 equivalent shares.
On 2018-10-29, the 30-day EMA at $175.59 fell below the 50-day EMA at $177.27 by 1% of the stock price ($163.23), triggering our exit. After holding the position for 819 days, we exited leaving $77,382.04 in available cash.
On 2019-03-05, the 30-day EMA at $169.93 crossed above the 50-day EMA at $168.17, exceeding it by 1% of the stock price ($174.55). We invested $78,444.58 — which includes $1,062.53 in interest earned while holding cash for 127 days — gaining exposure to 1,348.23 equivalent shares.
On 2020-03-16, the 30-day EMA at $209.08 fell below the 50-day EMA at $211.96 by 1% of the stock price ($169.30), triggering our exit. After holding the position for 377 days, we exited leaving $64,075.60 in available cash.
On 2020-05-11, the 30-day EMA at $211.23 crossed above the 50-day EMA at $208.77, exceeding it by 1% of the stock price ($226.87). We invested $64,462.07 — which includes $386.47 in interest earned while holding cash for 56 days — gaining exposure to 852.41 equivalent shares.
On 2022-01-26, the 30-day EMA at $376.50 fell below the 50-day EMA at $380.44 by 1% of the stock price ($344.57), triggering our exit. After holding the position for 625 days, we exited leaving $154,757.49 in available cash.
On 2022-08-16, the 30-day EMA at $312.31 crossed above the 50-day EMA at $308.90, exceeding it by 1% of the stock price ($332.28). We invested $158,151.06 — which includes $3,393.56 in interest earned while holding cash for 202 days — gaining exposure to 1,427.87 equivalent shares.
On 2022-09-23, the 30-day EMA at $298.49 fell below the 50-day EMA at $301.75 by 1% of the stock price ($275.51), triggering our exit. After holding the position for 38 days, we exited leaving $75,629.47 in available cash.
On 2023-02-07, the 30-day EMA at $288.51 crossed above the 50-day EMA at $285.03, exceeding it by 1% of the stock price ($309.88). We invested $76,750.31 — which includes $1,120.84 in interest earned while holding cash for 137 days — gaining exposure to 743.03 equivalent shares.
On 2025-03-13, the 30-day EMA at $504.54 fell below the 50-day EMA at $509.24 by 1% of the stock price ($468.34), triggering our exit. After holding the position for 765 days, we exited leaving $179,785.68 in available cash.
On 2025-05-29, the 30-day EMA at $498.59 crossed above the 50-day EMA at $493.14, exceeding it by 1% of the stock price ($519.93). We invested $181,278.39 — which includes $1,492.71 in interest earned while holding cash for 77 days — gaining exposure to 1,045.98 equivalent shares.
As of 2025-07-05, we hold an options position equivalent to 1,045.98 shares using call options (leveraged exposure). The net liquidation value of $217,606.01 accounts for all time decay costs.