BackAlpha
QQQ (Invesco QQQ Trust) EMA(30)/EMA(70) and EMA(10)/EMA(20) crossover strategy - with 4.0x leverage via call options
Backtest a QQQ (Invesco QQQ Trust) crossover strategy: it buys when 30-day EMA crosses above 70-day EMA by 1.0% of the stock price, it sells when 10-day EMA falls below 20-day EMA by 1.5% of the stock price. Uses 4.0x leverage via call options with 4.0% 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 $154,510.45.
Beginning with an initial investment of $10,000.00 on 1999-03-10, the portfolio value reached a value of $154,510.45 by 2025-07-05. This represents a 1,445.10% total gain over 26.32 years, equivalent to 10.96% annualized. This return is closely aligned with the typical long-term growth rates of diversified equity investments — a realistic and respectable outcome for a passive strategy.
Drawdown and Risk
The maximum drawdown recorded during this period was 93.62%. This drawdown began after a peak portfolio value of $54,196.17 on 2000-03-27, and reached its lowest point on 2003-03-31 when the portfolio value fell to $3,456.64. The drawdown lasted for 1099 days.
Maximum Drawdown
Max drawdown: 93.62% over 1099 days.
This investment experienced an extreme decline, reflecting exceptional volatility or exposure to severe market stress. Such drawdowns are typically seen in early-stage, speculative, or high-beta assets. The maximum drawdown lasted over three years — a very long decline that would have tested even the most patient investors. Such extended recoveries are rare but not impossible during major structural bear markets.
The Calmar Ratio — annualized return divided by maximum drawdown — was 0.12, reflecting the tradeoff between return and volatility. The return-to-risk efficiency is weak — drawdowns were relatively large compared to the returns achieved.
What the Strategy Suggests Today
The 30-day EMA is $531.01, and the 70-day EMA is $514.44, for a difference of $16.57. 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 10-day EMA is $545.54, and the 20-day EMA is $537.92, for a difference of $7.63. The current stock price is $556.22, and 1.5% of that is $8.34. 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 1999-04-07, the 30-day EMA at $52.29 crossed above the 70-day EMA at $51.66, exceeding it by 1% of the stock price ($55.03). We invested $10,030.11 — which includes $30.11 in interest earned while holding cash for 28 days — gaining exposure to 729.05 equivalent shares.
On 2000-04-24, the 10-day EMA at $90.81 fell below the 20-day EMA at $95.91 by 1.5% of the stock price ($84.75), triggering our exit. After holding the position for 383 days, we exited leaving $30,012.06 in available cash.
On 2000-07-17, the 30-day EMA at $94.50 crossed above the 70-day EMA at $93.46, exceeding it by 1% of the stock price ($101.75). We invested $30,284.00 — which includes $271.94 in interest earned while holding cash for 84 days — gaining exposure to 1,190.53 equivalent shares.
On 2000-08-01, the 10-day EMA at $92.47 fell below the 20-day EMA at $93.87 by 1.5% of the stock price ($88.25), triggering our exit. After holding the position for 15 days, we exited leaving $14,016.63 in available cash.
On 2000-08-31, the 30-day EMA at $95.49 crossed above the 70-day EMA at $94.32, exceeding it by 1% of the stock price ($101.63). We invested $14,061.85 — which includes $45.23 in interest earned while holding cash for 30 days — gaining exposure to 553.48 equivalent shares.
On 2000-09-27, the 10-day EMA at $91.35 fell below the 20-day EMA at $92.75 by 1.5% of the stock price ($89.56), triggering our exit. After holding the position for 27 days, we exited leaving $7,222.18 in available cash.
On 2001-11-28, the 30-day EMA at $37.43 crossed above the 70-day EMA at $37.04, exceeding it by 1% of the stock price ($38.75). We invested $7,561.05 — which includes $338.86 in interest earned while holding cash for 427 days — gaining exposure to 780.50 equivalent shares.
On 2002-02-04, the 10-day EMA at $38.32 fell below the 20-day EMA at $38.89 by 1.5% of the stock price ($36.92), triggering our exit. After holding the position for 68 days, we exited leaving $5,911.09 in available cash.
On 2002-11-18, the 30-day EMA at $24.54 crossed above the 70-day EMA at $24.25, exceeding it by 1% of the stock price ($26.05). We invested $6,096.10 — which includes $185.01 in interest earned while holding cash for 287 days — gaining exposure to 936.06 equivalent shares.
On 2003-02-04, the 10-day EMA at $24.78 fell below the 20-day EMA at $25.15 by 1.5% of the stock price ($24.19), triggering our exit. After holding the position for 78 days, we exited leaving $4,149.93 in available cash.
On 2003-03-27, the 30-day EMA at $25.58 crossed above the 70-day EMA at $25.31, exceeding it by 1% of the stock price ($26.37). We invested $4,172.72 — which includes $22.79 in interest earned while holding cash for 51 days — gaining exposure to 632.95 equivalent shares.
On 2004-03-23, the 10-day EMA at $34.96 fell below the 20-day EMA at $35.50 by 1.5% of the stock price ($34.03), triggering our exit. After holding the position for 362 days, we exited leaving $8,359.51 in available cash.
On 2004-10-29, the 30-day EMA at $35.82 crossed above the 70-day EMA at $35.43, exceeding it by 1% of the stock price ($36.90). We invested $8,559.35 — which includes $199.84 in interest earned while holding cash for 220 days — gaining exposure to 927.84 equivalent shares.
On 2005-01-25, the 10-day EMA at $37.61 fell below the 20-day EMA at $38.19 by 1.5% of the stock price ($36.71), triggering our exit. After holding the position for 88 days, we exited leaving $8,057.99 in available cash.
On 2005-07-19, the 30-day EMA at $37.80 crossed above the 70-day EMA at $37.40, exceeding it by 1% of the stock price ($39.18). We invested $8,210.85 — which includes $152.86 in interest earned while holding cash for 175 days — gaining exposure to 838.27 equivalent shares.
On 2006-05-18, the 10-day EMA at $40.36 fell below the 20-day EMA at $40.95 by 1.5% of the stock price ($39.05), triggering our exit. After holding the position for 303 days, we exited leaving $7,015.68 in available cash.
On 2006-09-25, the 30-day EMA at $39.14 crossed above the 70-day EMA at $38.73, exceeding it by 1% of the stock price ($40.57). We invested $7,114.30 — which includes $98.62 in interest earned while holding cash for 130 days — gaining exposure to 701.43 equivalent shares.
On 2007-11-26, the 10-day EMA at $50.07 fell below the 20-day EMA at $50.93 by 1.5% of the stock price ($48.98), triggering our exit. After holding the position for 427 days, we exited leaving $11,678.15 in available cash.
On 2008-05-07, the 30-day EMA at $46.49 crossed above the 70-day EMA at $45.98, exceeding it by 1% of the stock price ($48.04). We invested $11,884.36 — which includes $206.21 in interest earned while holding cash for 163 days — gaining exposure to 989.54 equivalent shares.
On 2008-06-30, the 10-day EMA at $46.75 fell below the 20-day EMA at $47.47 by 1.5% of the stock price ($45.17), triggering our exit. After holding the position for 54 days, we exited leaving $8,767.93 in available cash.
On 2009-04-14, the 30-day EMA at $30.61 crossed above the 70-day EMA at $30.27, exceeding it by 1% of the stock price ($32.49). We invested $9,043.32 — which includes $275.40 in interest earned while holding cash for 288 days — gaining exposure to 1,113.37 equivalent shares.
On 2010-05-20, the 10-day EMA at $46.71 fell below the 20-day EMA at $47.49 by 1.5% of the stock price ($44.35), triggering our exit. After holding the position for 401 days, we exited leaving $20,656.19 in available cash.
On 2010-09-23, the 30-day EMA at $46.62 crossed above the 70-day EMA at $46.10, exceeding it by 1% of the stock price ($48.67). We invested $20,937.57 — which includes $281.38 in interest earned while holding cash for 126 days — gaining exposure to 1,720.78 equivalent shares.
On 2011-06-17, the 10-day EMA at $54.94 fell below the 20-day EMA at $55.77 by 1.5% of the stock price ($53.79), triggering our exit. After holding the position for 267 days, we exited leaving $27,311.99 in available cash.
On 2011-10-28, the 30-day EMA at $56.31 crossed above the 70-day EMA at $55.71, exceeding it by 1% of the stock price ($58.94). We invested $27,704.85 — which includes $392.87 in interest earned while holding cash for 133 days — gaining exposure to 1,880.21 equivalent shares.
On 2011-11-25, the 10-day EMA at $55.10 fell below the 20-day EMA at $55.95 by 1.5% of the stock price ($52.88), triggering our exit. After holding the position for 28 days, we exited leaving $15,977.10 in available cash.
On 2012-01-19, the 30-day EMA at $57.23 crossed above the 70-day EMA at $56.58, exceeding it by 1% of the stock price ($59.86). We invested $16,071.74 — which includes $94.64 in interest earned while holding cash for 55 days — gaining exposure to 1,073.96 equivalent shares.
On 2012-05-18, the 10-day EMA at $63.22 fell below the 20-day EMA at $64.28 by 1.5% of the stock price ($60.81), triggering our exit. After holding the position for 120 days, we exited leaving $16,258.24 in available cash.
On 2012-08-14, the 30-day EMA at $64.98 crossed above the 70-day EMA at $64.26, exceeding it by 1% of the stock price ($67.05). We invested $16,412.60 — which includes $154.36 in interest earned while holding cash for 88 days — gaining exposure to 979.13 equivalent shares.
On 2012-11-13, the 10-day EMA at $64.22 fell below the 20-day EMA at $65.17 by 1.5% of the stock price ($62.98), triggering our exit. After holding the position for 91 days, we exited leaving $11,782.89 in available cash.
On 2013-04-12, the 30-day EMA at $68.57 crossed above the 70-day EMA at $67.84, exceeding it by 1% of the stock price ($69.94). We invested $11,974.22 — which includes $191.33 in interest earned while holding cash for 150 days — gaining exposure to 684.83 equivalent shares.
On 2014-10-16, the 10-day EMA at $94.57 fell below the 20-day EMA at $96.09 by 1.5% of the stock price ($91.79), triggering our exit. After holding the position for 552 days, we exited leaving $24,012.78 in available cash.
On 2014-11-05, the 30-day EMA at $98.30 crossed above the 70-day EMA at $97.29, exceeding it by 1% of the stock price ($101.37). We invested $24,064.40 — which includes $51.63 in interest earned while holding cash for 20 days — gaining exposure to 949.57 equivalent shares.
On 2015-08-24, the 10-day EMA at $106.84 fell below the 20-day EMA at $108.64 by 1.5% of the stock price ($98.46), triggering our exit. After holding the position for 292 days, we exited leaving $18,235.11 in available cash.
On 2015-11-03, the 30-day EMA at $109.32 crossed above the 70-day EMA at $107.99, exceeding it by 1% of the stock price ($115.01). We invested $18,374.67 — which includes $139.56 in interest earned while holding cash for 71 days — gaining exposure to 639.06 equivalent shares.
On 2016-01-08, the 10-day EMA at $108.78 fell below the 20-day EMA at $110.39 by 1.5% of the stock price ($104.01), triggering our exit. After holding the position for 66 days, we exited leaving $10,822.22 in available cash.
On 2016-04-15, the 30-day EMA at $108.11 crossed above the 70-day EMA at $106.98, exceeding it by 1% of the stock price ($110.64). We invested $10,936.71 — which includes $114.49 in interest earned while holding cash for 98 days — gaining exposure to 395.40 equivalent shares.
On 2018-04-02, the 10-day EMA at $161.41 fell below the 20-day EMA at $163.85 by 1.5% of the stock price ($155.51), triggering our exit. After holding the position for 717 days, we exited leaving $25,176.94 in available cash.
On 2018-05-24, the 30-day EMA at $166.11 crossed above the 70-day EMA at $164.34, exceeding it by 1% of the stock price ($169.55). We invested $25,317.92 — which includes $140.98 in interest earned while holding cash for 52 days — gaining exposure to 597.30 equivalent shares.
On 2018-10-15, the 10-day EMA at $176.69 fell below the 20-day EMA at $179.35 by 1.5% of the stock price ($172.21), triggering our exit. After holding the position for 144 days, we exited leaving $25,328.59 in available cash.
On 2019-02-28, the 30-day EMA at $168.93 crossed above the 70-day EMA at $167.19, exceeding it by 1% of the stock price ($173.19). We invested $25,701.20 — which includes $372.61 in interest earned while holding cash for 136 days — gaining exposure to 593.60 equivalent shares.
On 2019-06-03, the 10-day EMA at $176.77 fell below the 20-day EMA at $179.65 by 1.5% of the stock price ($170.12), triggering our exit. After holding the position for 95 days, we exited leaving $22,824.74 in available cash.
On 2019-06-24, the 30-day EMA at $183.02 crossed above the 70-day EMA at $181.13, exceeding it by 1% of the stock price ($188.16). We invested $22,876.27 — which includes $51.53 in interest earned while holding cash for 21 days — gaining exposure to 486.32 equivalent shares.
On 2020-03-10, the 10-day EMA at $209.61 fell below the 20-day EMA at $215.03 by 1.5% of the stock price ($204.11), triggering our exit. After holding the position for 260 days, we exited leaving $28,042.22 in available cash.
On 2020-05-08, the 30-day EMA at $210.15 crossed above the 70-day EMA at $207.45, exceeding it by 1% of the stock price ($224.86). We invested $28,220.45 — which includes $178.23 in interest earned while holding cash for 59 days — gaining exposure to 502.01 equivalent shares.
On 2022-01-20, the 10-day EMA at $376.30 fell below the 20-day EMA at $382.50 by 1.5% of the stock price ($361.72), triggering our exit. After holding the position for 622 days, we exited leaving $89,128.35 in available cash.
On 2022-08-18, the 30-day EMA at $314.38 crossed above the 70-day EMA at $311.07, exceeding it by 1% of the stock price ($329.28). We invested $91,161.06 — which includes $2,032.71 in interest earned while holding cash for 210 days — gaining exposure to 1,107.40 equivalent shares.
On 2022-09-06, the 10-day EMA at $303.70 fell below the 20-day EMA at $308.73 by 1.5% of the stock price ($293.05), triggering our exit. After holding the position for 19 days, we exited leaving $50,295.26 in available cash.
On 2023-02-06, the 30-day EMA at $287.04 crossed above the 70-day EMA at $283.62, exceeding it by 1% of the stock price ($303.59). We invested $51,128.41 — which includes $833.15 in interest earned while holding cash for 153 days — gaining exposure to 673.65 equivalent shares.
On 2024-08-07, the 10-day EMA at $451.88 fell below the 20-day EMA at $462.11 by 1.5% of the stock price ($434.77), triggering our exit. After holding the position for 548 days, we exited leaving $127,102.03 in available cash.
On 2024-09-27, the 30-day EMA at $474.62 crossed above the 70-day EMA at $469.41, exceeding it by 1% of the stock price ($486.75). We invested $127,800.01 — which includes $697.99 in interest earned while holding cash for 51 days — gaining exposure to 1,050.23 equivalent shares.
On 2025-03-06, the 10-day EMA at $505.42 fell below the 20-day EMA at $513.11 by 1.5% of the stock price ($488.20), triggering our exit. After holding the position for 160 days, we exited leaving $120,463.93 in available cash.
On 2025-05-28, the 30-day EMA at $497.12 crossed above the 70-day EMA at $491.54, exceeding it by 1% of the stock price ($518.91). We invested $121,542.40 — which includes $1,078.47 in interest earned while holding cash for 83 days — gaining exposure to 936.91 equivalent shares.
As of 2025-07-05, we hold an options position equivalent to 936.91 shares using call options (leveraged exposure). The net liquidation value of $154,510.45 accounts for all time decay costs.