A short strangle that wins 84% of the time sounds like a dream, so why did it lose money in 2026? This Market Measures digs into the hidden tail risk of low-delta strangles, based on a sharp study from a trader on X. Testing 45 DTE strangles from a tight 40 delta out to a very wide 5 delta, opened every day from 2020 to 2026, the win rate climbs exactly as you would expect, from 67% at 40 delta to 84% at 5 delta. But the credits shrink too.
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Chapters
00:00 The hidden tail risk of low-delta strangles
00:35 The study setup, 40 delta to 5 delta
01:59 Win rate climbs from 67% to 84%
02:11 But the worst loss balloons
03:00 Per dollar of credit, it's an illusion
04:10 Pennies in front of a steamroller
05:12 One melt-up flips the year red
06:38 Holding t...