Market Measures

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Directional Bets When Long or Short Premium

Market Measures

Today, we will compare long deep in-the-money Puts to short out-of-the-money Calls and short out-of-the-money Puts.

Study
  • SPY, 2005-2016
  • Buying 80 Delta Puts
  • Selling 30 Delta Puts
  • Selling 30 Delta Calls
  • All held to expiration
  • Compared:
    • When SPY increased from entry to expiration
    • When SPY decreased from entry to expiration
Results
  • Long Puts are only profitable on large down moves
  • When looking at all occurrences, both short calls and short puts have high success rates and net positive results, especially when combined.
  • This study did not take into account managing at 50%, which would likely improve short Puts and short Calls results.

Check out the segment as Beef, Bat and Pete discuss their most important takeaways from the study.

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