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Managing Earlier in Spreads

Market Measures

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Managing losers in risk defined strategies has proven to be ineffective in enhancing performance. So what about managing earlier?

Study:

  • SPY, closest to 45 DTE, 2005 to Present
  • Put Spreads with 30 delta Short Puts
  • Compared the Width of the Wings at:
  • 2, 10
  • Holding to expiration
  • Managing Earlier (21 DTE)

Results: When trading spreads, it is better to manager early (21 DTE). Regardless of the width of the strikes, managing earlier provides better P/L and better volatility control than holding to expiration.

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