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 30call.
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.