Market Measures

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Rolling Strangles

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.

Some of our previous research has indicated that we should roll the untested side of a Strangle if one side is tested, so we decided to run a test to validate this strategy.

A study was conducted using SPY (S&P 500 ETF) from 2005 to 2015 (3,000 occurrences). We sold a 1 standard deviation Strangle every business day using the options closest to 45 days to expiration (DTE).

If the remaining time to expiration was more than four weeks, we held the position to expiration. If less than four weeks remained, we rolled the untested side to the 30 delta strike. After any adjustments were made, the positions were taken to expiration.

The call side was tested 25% of the time, while the puts were tested 14% of the time. The results when we rolled were compared to rolling only puts, only calls, or both. The results gave us a definitive answer.

Watch this segment of Market Measures with Tom Sosnoff and Tony Battista for the valuable takeaways and the detailed results related to rolling the untested side of a strangle.