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Market Measures

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Visualizing Tail Risk

Market Measures

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Over the course of 13 years, we have had success over time for short premium strategies. However, there were outlier moves to the downside. How does managing early reduce a trader's exposure to these black swan events.

Study:
  • SPY, 2005-present, 45 DTE
  • 16 delta strangles
  • Compared managing at 21 DTE and holding to expiration
Results

We find that although on average, holding to expiration is more profitable per trade, you reduce 67% of outlier moves (P/L less that -$500 in a trade) by managing at 21 DTE.

Tune in as Tom and Tony interpret the results!

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