Market Measures

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Delta Decisions: How Low is Too Low?

Market Measures

In today's segment, Tom and Tony breakdown the results of a large dataset, examining short puts in SPX.

They analyze strikes from 1 delta all the way up to 50 delta. The core focus is on return on capital and (more specifically) return on capital per day. There is a diminishing benefit when looking at lower delta strikes, which don't make enough money per day to justify the capital requirement.

The team also looked at the additional P/L added for each delta added per strike. In this regard, there is a diminishing benefit to adding more deltas beyond the 20 or 30 mark.

The study used a massive amount of data, which yielded a ton of interesting metrics. Tune in for Tom and Tony's full discussion!

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