Selling strangles is one of our favorite strategies so we ran a study on how strangles of various deltas have performed during both bull and bear markets.
A study was conducted shorting strangles in the SPY (S&P 500 ETF) from 2005 to present (1325 occurrences) using the series closest to 45 days to expiration (DTE). We compared strikes at 5, 15, 25 and 30 deltas and also tested for both bull markets (January 2005 - October 2007 and March 2009 - present) and bear markets (October 2007-March 2009). All positions were held to expiration (testing for managing winners at 50% would have been too complex).
A table of the performance of short strangles in a bull market was displayed. The table included the average P/L per trade, median P/L per trade and percentage of profitable trades on the 5, 15, 25 and 30 delta short strangles.
A table of the performance of short strangles in a bear market was displayed. The table included the average P/L per trade, median P/L per trade and percentage of profitable trades on the 5, 15, 25 and 30 delta short strangles. The results were skewed by several large drawdowns.
A table of the performance of short strangles in all markets was displayed. The table included the average P/L per trade, median P/L per trade and percentage of profitable trades on the 5, 15, 25 and 30 delta short strangles.
Watch this segment of “Market Measures” with Tom Sosnoff and Tony Battista for the takeaways and the detailed study results testing short strangles of various deltas during both bull and bear markets and the importance of staying active in all markets.
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