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      Market Data provided by CME Group & powered by dxFeed Technology. Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.
      Market Measures

      Short Put Management Performance

      Sep 12, 2018

      Traders have lots of flexibility when deciding how to manage their trades. In this segment, we compare the impact different management targets have on short put trade performance.

      The Study:

      • 16 delta SPY Puts
      • 45 DTE
      • 2005 – 2017
      • Compared:
      • Managing at 50% max profit
      • Managing at 25% max profit

      Results:

      When comparing the percent of profit management targets, we see that managing at 50% results in a higher P/L but also has a longer trade duration. In contrast, managing at 25% of the max profit frees up capital more quickly to make trades but results in a lower cash reserve in the case of a down turn.

      To take the study a step further we also looked at the performance of managing trades when the number of days to expiration is 21. We see that the ending P/L of managing earlier is very close to both managing at 25% and managing at 50%, all of which outperformed holding to expiration.

      In conclusion, whether you prefer to manage your trades at 25%, 50% or after 21 days is up to you but the most important takeaway is to manage your trades. Holding trades to expiration introduces gamma risk and a lower probability of profit.

      This video and its content are provided solely by tastylive, Inc. (“tastylive”) and are for informational and educational purposes only. tastylive was previously known as tastytrade, Inc. (“tastytrade”). This video and its content were created prior to the legal name change of tastylive. As a result, this video may reference tastytrade, its prior legal name.

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