Market Measures

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Directional Trading and Price Extremes

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.

How do naked short options perform after large price movements and at price extremes?

Let’s compare selling naked options into multiple days of trading in one direction to a large weekly move. The tastytrade Research Department used 45 DTE options to see if the following setup worked from 2005 to now.

If the market went lower, we sold a 30 delta put, and if it went higher, we sold a 30 delta call.

We find that that selling puts into weakness (either measured by days or % moves) did yield a substantial profit. Selling calls into strength yielded decent profits when waiting for large percentage moves up over number of up days.

Tune in as Tom and Tony interpret these takeaways.

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