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Delta Risk when Short Premium

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.

Delta estimates the amount a position should gain or lose with a 1-point change in the underlying price. It is one of the most important greeks to gauge the directional risk.

Theoretically, the delta of short OTM options should become closer to zero toward expiration date. But is the historical data consistent with theoretical number? To prove that, we ran a study by analyzing standard 1SD 45 DTE SPY strangles.

We recorded the daily delta and the magnitude of daily delta changes at various levels. Watch this segment with Tom and Tony for the takeaways, and how delta risk would impact the position.

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