Usually we default to trading 16 delta strangles in most environments, but what if we moved our deltas closer to the money when IV Rank was high?Study
- 2005 - 2018, 45 DTE
- Compared selling:
- 10, 20, 30 delta strangles when IVR > 50
- 10, 20, 30 delta strangles when IVR < 50
- Recorded daily P/L
We find that when IVR is high, we are better off P/L wise to scale our deltas closer to the money. When IVR is low, P/Ls tend to stay relatively the same for all deltas. Additionally, managing early improved all performance for all deltas and IVR levels across the board.