This segment of Market Measures analyzes how well buying power reduction (BPR) captures our losses.
BPR is the amount of money the broker holds during a trade in case we lose. If we lose, this BPR (the money the broker holds) is used to pay for the losses. But are the losses ever greater than the calculated BPR? T
his study takes a look at 16 delta strangles and the number of times the losses breach the initial BPR. The results show that BPR captures 99.9% of the losing trades. Therefore, BPR is efficient and we do not have to worry about losses exceeding our BPR.