Market Measures

Monday – Friday | 9:00 – 9:20a CT

Delta Rebalance - Volatility Control

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.

When trading delta neutral, it’s important to keep directional risk under control. If the deltas of a neutral strangle reach +- 1, the position is synthetically long/short 100 shares of the underlying. This implies greater directional risk. Rolling when a leg becomes breached is a mechanical strategy which prevents the position from taking on too much directional risk.

The Study: Results:

As expected, when the position gets tested, the tested side has a delta close to 50. Rolling the position when the strike is touched helps reduce the delta risk which exhibited better portfolio performance and lower portfolio volatility when compared to holding to expiration.

Market Measures More installments

See All »

Latest tastytrade Videos As of December 07

Most Shared From the last 30 days