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Delta Rebalance - Performance Analysis

Market Measures

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With the delta rebalance strategy, when a leg becomes tested, we roll the entire position to the original trade's deltas. How has this strategy performed historically?

The Study:
  • SPY
  • 2005 - 2017
  • 1 Standard Deviation Strangle
  • 45 Days to Expiration
  • Compared:
    • Holding Positions to Expiration
    • Rebalancing the Position to Original Delta when Tested.

Ultimately, rebalancing a trade's delta produces a fair win rate with shorter duration and cuts the largest loss in half.

Also, our research indicated that 40% of the tested positions had a positive P/L when the leg became tested, making the case that rolling to re-establish the position is not as costly as once thought.

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