Trading is all about measuring risk against reward to pick the best probability of success for our trade.
Whatprovides traders with the most value in terms of risk and reward?Study
- SPY, 45 DTE, 2005-2018
- 10, 16, 20, 30, 40, and 50∆ strangle (over 20,000 occurrences)
- Managed at expiration and 21 DTE
- Recorded average P/L, and volatility of P/L of both strategies
We find that although higher delta strangles deliver greater raw P/L, the lower delta strangles provide a better value in terms of lower risk per each dollar you stand to make.