tasytrade strangle studies often focus on either on 16 delta, or more recently, 30 delta strangles.
The 30 delta strikes have a much lower probability of profit than 16 delta strangles, yet have historically been profitable in our studies. Why is this?
One main point is the success rates on the 30 delta strangles compared to the probability of profit.
The other focus of the data was on the breakeven points of the 30 delta strangles, compared to the strikes of the 16 delta strangles.
The 30 delta strangle has an actual success rate above the expected success rate of the 16 delta strangle. This even holds true with no management.
It's fair to assume that this is due to the extra premium collected-- pushing out the breakeven on the 30 delta strangle.
On average the 30 delta strangle "breakeven range" is 89% of the 16 delta strike range. This, combined with the markets implied moves being overstated leads to a high win rate for the 30 delta strangles.
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