Today's market measure focused on zero days to expiration (DT) options and their capital efficiency. The team noted their preference for defined risk trades in zero DT options, as they are more capital efficient than undefined risk trades. They compared the capital usage of 25 delta strangles and iron condors at zero DT and 45 days to expiration and found a significant difference in capital requirements due to fixed prices. They concluded that zero DT options were more capital efficient when defining risk and examining capital requirements across different situations.
The team found that buying cheap out-of-the-money wings saved money without giving up much and recommended allocating fewer contracts with wider strikes to optimize capital efficiency in zero DT and longer-term options. The cost savings were highlighted by a 25 delta strangle in SPI costing approximately $7,763 for one strangle, while an iron condor cost around $122, representing a reduction in capital usage of 98%. They compared 25-delta short iron condors with long wings and found that zero DT options demonstrated much lower capital requirements against longer-term options.
While zero DT options are cost-effective, the team cautioned that they tend to be binary, meaning they cannot be managed or adjusted late in the day. Longer-dated options, on the other hand, offer more flexibility in managing positions. In summary, the article recommended utilizing zero DT options for defined risk trades with a focus on capital efficiency, while longer-dated options offer more flexibility in position management.
The article is focused on trading, particularly on the capital efficiency of zero DT options. It explores the cost savings of defined risk trades in zero DT options and highlights the importance of examining capital requirements across different situations. The team recommends allocating fewer contracts with wider strikes to optimize capital efficiency while cautioning that zero DT options tend to be binary and cannot be managed or adjusted late in the day. Overall, the article provides valuable insights into the cost-savings and flexibility of zero DT and longer-dated options for traders.
tastylive content is created, produced, and provided solely by tastylive, Inc. (“tastylive”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involve risk and may result in a loss greater than the original amount invested. tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastylive is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request. tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer. Options, futures, and futures options are not suitable for all investors. Prior to trading securities, options, futures, or futures options, please read the applicable risk disclosures, including, but not limited to, the Characteristics and Risks of Standardized Options Disclosure and the Futures and Exchange-Traded Options Risk Disclosure found on tastytrade.com/disclosures.
tastytrade, Inc. ("tastytrade”) is a registered broker-dealer and member of FINRA, NFA, and SIPC. tastytrade was previously known as tastyworks, Inc. (“tastyworks”). tastytrade offers self-directed brokerage accounts to its customers. tastytrade does not give financial or trading advice, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastytrade’s systems, services or products. tastytrade is a wholly-owned subsidiary of tastylive, Inc.
tastytrade has entered into a Marketing Agreement with tastylive (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade. tastytrade and Marketing Agent are separate entities with their own products and services. tastylive is the parent company of tastytrade.
tastycrypto is provided solely by tasty Software Solutions, LLC. tasty Software Solutions, LLC is a separate but affiliate company of tastylive, Inc. Neither tastylive nor any of its affiliates are responsible for the products or services provided by tasty Software Solutions, LLC. Cryptocurrency trading is not suitable for all investors due to the number of risks involved. The value of any cryptocurrency, including digital assets pegged to fiat currency, commodities, or any other asset, may go to zero.
© copyright 2013 - 2024 tastylive, Inc. All Rights Reserved. Applicable portions of the Terms of Use on tastylive.com apply. Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastylive’s podcasts as necessary to view for personal use. tastylive was previously known as tastytrade, Inc. tastylive is a trademark/servicemark owned by tastylive, Inc.