In our last market measure, we have concluded that we observe a median theta/asset ratio of 0.05% in our accounts.
This means in a $10,000 portfolio, utilizing 25% of your account, you should expect a minimum of $5 of theta decay per day.
What about Strangles with different deltas?Study:
- 2005 - 2018
- 45 Days-to-Expiration
- Recorded the daily Theta Ratio (Theta / Asset Value)
- $1M Account, 25% Capital Allocation
- Varying Deltas:
- 10, 16, 20, 30, 40, 50
We find that as delta increases, the median theta/asset ratio increases as well until the 30 delta strangle. The 40 and 50 delta strangles exhibit lower theta/asset ratios.