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.
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: https://gyazo.com/1cf764c5f5c7440b8baa6714d08f2a5a
You can also test the deltas around .16 like .25 and .1: https://gyazo.com/64ec4dc56185a6ec26f474b14fdeb8bb https://gyazo.com/c847757f4a2ac0c25185d422548f02f5 And the .1 short puts: https://gyazo.com/026ef4d1f3a76f62c882c9074cc27de2 https://gyazo.com/30f1eabf4215064d7c62149e3dba0b70 So what is the sweet spot? It depends. The Sharpes are comparable. Some people look at annual return / max drawdown https://gyazo.com/4becdcdd061cc1b3c688f97a7f0ab317 Here the 25 delta wins just barely.
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
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
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.
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.
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.
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..