Market Measures

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Delta Decisions: How Low is Too Low?

Market Measures

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

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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