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Market Measures

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How Outliers Affect Options

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 outliers affect short premium positions during and at the end of the trade?

Study:
  • SPY, 2005 to present
  • 45 DTE
  • Sold 30∆ Strangles (short 30∆ put and short 30∆ call) the day before an outlier move (+- 3, 4, and 5%)
  • Held to expiration in order to study the entire 45 day period
  • Observed the effects of the outlier move on the strangle P/L
Results

We find that initially, our positions take a hit due to the outlier move, but at the end of the trade, our positions were profitable on average.

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