Market Measures

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Dynamic Management

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.

In a recent Options Jive, we talked through the notion of reducing our profit target as time in the trade goes by in an attempt to reduce risk in any single trade. Today, the guys finally go through the historical data to see if the risk is actually reduced.

The Study
  • 2005 to present
  • S&P 500 ETF (SPY)
  • 45 DTE options
  • Looked at selling Strangles and Straddles and decreasing the profit target by 10% every 15 days if could not manage for winner.
The Results

Maybe unsurprisingly, this strategy saw an increase in the win rate when decreasing the management marker over time relative to holding out for the original profit target. However, this came at the expense of the average P/L, which fell slightly when we managed dynamically. Check out the segment above for more details and commentary on the subject.

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