Market Measures

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Expected Performance: Part 2

Market Measures

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Tom and Tony compare the performance of strategies across deltas and management tactics to create an estimate for trade profitability as % of trade credit.

The Study:
  • SPY
  • 2005 – Present
  • 45 Days to Expiration
    • Managed at 21 DTE
    • Held to expiration
  • Sold 10, 16, 20, 30 Delta Strangles
  • Divided Each P&L by the Initial Credit
Results:

The average P&L as a percent of the trade credit decreases as delta increases because closer to the money options decay slower than out of the money options. However, the higher delta strangles are higher in terms of raw average P/L.

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