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Scaling Deltas in High IV

Market Measures

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We have lots of deltas to choose from when looking at an option chain.

We generally default to 16 deltas , but can we optimize our P/L by choosing delta based on IV Rank?

Study
  • SPY
  • 2005 - 2017, 45 DTE
  • Compared selling:
    • 16, 20, 30 delta strangles when IVR > 50
    • 16, 20, 30 delta strangles when IVR < 50
  • Recorded P/L, win rate
Results

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.

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