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
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.