We have lots of deltas to choose from when looking at an option chain.
We generally default to 16, but can we optimize our P/L by choosing delta based on ?Study
- 2005 - 2017, 45 DTE
- Compared selling:
- 16, 20, 30 delta when IVR > 50
- 16, 20, 30 delta strangles when IVR < 50
- Recorded P/L, win rate
We find that scaling our deltas higher when IVR is higher provides substantial increases in P/L. When IVR is low, P/L stays relatively flat across most deltas, making it not worthwhile to scale up.