Market Measures

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DTE vs. Duration

Market Measures

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Generally, we like to enter a trade with as close to 45 days to expiration and exit around 21 days to expiration. This has a duration of around 20-25 days. So what if we instead of selling at 45 DTE and managing at 21 DTE, we sold at 21 DTE and held to expiration? The durations of the trades are the same.

  • SPY
  • 2005 - 2018
  • 16 Delta Strangles
  • Compared two Strategies:
    • Selling 21 DTE, Holding to Expiration
    • Selling 45 DTE, Managing at 21 DTE
  • Both Strategies have the Same Duration

It turns out that the 45 DTE trades have a much higher average P/L per trade and a much lower risk profile. This is the benefit of active management and strategic investing that tastytrade employs.

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