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Best of 2016: Premium Selling

Market Measures

As we approach the end of the year, we tend to see many “best of” lists. tastytrade decided to jump on the bandwagon to bring you 3 of our top segments on premium selling.

"Sell Puts or Buy Stock" on May 24, 2016

In this study, we tested buying 100 shares in 30 well known equities versus selling the 45 Days To Expiration (DTE) at-the-money (ATM) Puts in the same equities. The study revealed that the amount in profitable trades of selling ATM Puts was higher and the Standard Deviation of risk was lower and it added a 4.5% downside buffer.

"Backtesting Iron Condors in SPX" on June 29, 2016

In terms of analyzing more neutral strategies, this study compared a short wide Iron Condor using the 40 and 5 Delta strikes versus a narrow short Iron Condor using the 15 and 5 Delta Strikes. The probability of profit (POP) was lower with the wider Iron Condor, but the average P/L at expiration was double and the average P/L when managed at 50% of max profit was nearly triple.

"Straddles: No Pain, No Gain" on June 6, 2016

Last but not least, the Research Team tested SPY short Straddles with a 45 DTE from 2005 to present. We compared holding to expiration and managing the trades at 25% of max profit (if possible). The study showed that managing Straddles greatly improved the success rate, average duration and average P/L per day. More importantly, we learned that we should expect to take some “heat” on our Straddles as 73% will be losers at some point.

Watch this segment of Market Measures with Tom Sosnoff and Tony Battista for an important recap of three of the best 2016 Market Measure segments on selling premium.

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