Market Measures

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Straddles: Why Not 10%?

Market Measures

Recent research segments investigated the concept of managing $5 wide Iron Flies for 10% of the credit received. Does this methodology work with Short Straddles?

Study

The team analyzed $5 wide iron flies, and short straddles on IWM and SPY.

They used data from 2005 to present and looked to manage these trades at 10% or 25% of the credit received.

Results

The results showed that both strategies were historically profitable when managed at 10% or 25%. However, digging a little deeper into the metrics showed that waiting for 25% in straddles enhanced the P/L per day. For the $5 wide Iron Flies, waiting for 25% actually lowered the P/L per day.

Watch the video to hear Tom and TP's commentary on this interesting study!

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