16-Delta is the "sweet spot" for short put?

klattermusen said:
how about someone post a real world strike and price of what the believe to be a 16 delta.

Keep it simple
thanks
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IMO strike = $16 off of the current underlying spot, ie. subtract or add, depending on the context.
This then would mean that the title of the thread "16-Delta is the "sweet spot" for short put?" is dependent on the spot... ie. is then not generally valid...

But one can interpret it also in a different way (and maybe that was intended by them):
get the ATM Greeks, then compute x = 16 / delta, then strike = spot + x (or spot - x, depending on context), meaning to take the nearest strike from the chain table to that computed strike.
 
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earth_imperator said:
Hmm. still unclear to me how you did it b/c saying "Instead of trading only every 45 days" IMO contradicts their methodology as they opened every day a position (and in one of the test variants held it till expiration in 30 to 60 days).

Their conclusion is this:
"Since 2007, doing nothing and simply holding short put positions (16-delta, 30-60 DTE) to expiration has resulted in the highest average P/L per trade."
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Yes, I am doing less trading but it doesn't affect the returns. They trade every day. I trade every 5 days. That is just a setting in our backtester.
Here are the rules:
1cf764c5f5c7440b8baa6714d08f2a5a.png

https://gyazo.com/1cf764c5f5c7440b8baa6714d08f2a5a
 
I'm too lazy to open up the link,but there is no way the 16 delta put is the way to go,and there is no chance it outperforms the underlying..

I doubt it outperforms on a delta adjusted basis
 
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That would make very little sense and the Deltas would be all over the place..

If anything,it could be 116% of spot..but I doubt it


earth_imperator said:
Just for clarification:
I think by "16 delta" they mean a strike that is $16 higher than the current spot (as they shortsell Puts).
This has nothing to do with the delta of the option Greeks, IMO.

View attachment 317014
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earth_imperator said:
FYI: SPY is 1/10 of SPX... :), ie. the same stuff, just reduxed.
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Not the same, spy I can take assignments by closing the long leg, waiting for rebounds. Cash settled is cash out of account balance, a lose that can’t be recovered.
 
taowave said:
That would make very little sense and the Deltas would be all over the place..

If anything,it could be 116% of spot..but I doubt it
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What about this:
get the ATM Greeks, then compute x = 16 / delta, then strike = spot + x (or spot - x, depending on context), meaning to take the nearest strike from the chain table to that computed strike.
 
mervyn said:
Not the same, spy I can take assignments by closing the long leg, waiting for rebounds. Cash settled is cash out of account balance, a lose that can’t be recovered.
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SPX and SPY have about the same relative performance, whereby SPY is about 1/10 of SPX.
The main differences are:
American Style (SPX) vs European Style (SPY)
Cash Settled (SPX) vs Physical Delivery (SPY)

Here's much more info about the differences between SPX and SPY: https://www.projectfinance.com/spx-vs-spy/
It says "For settlement type, SPX appears to be the clear winner in the eyes of most traders". Hmm. I don't think so.

I think you mean the Early Assignment risk with American Style when you are short the options. In this case the position gets closed and you have no chance for rebounds. But Early Assignment is not possible with European Style, ie. in case of SPY.
 
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Seems to be needlessly complicated..Why reinvent the wheel?

I would stick with Delta or Percent if Spot and decide if you want to have an IV strike effect..


earth_imperator said:
What about this:
get the ATM Greeks, then compute x = 16 / delta, then strike = spot + x (or spot - x, depending on context), meaning to take the nearest strike from the chain table to that computed strike.
More...
 
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