Most Options Traders Think Low Delta Strangles Are Safer. 11 Years of Data Says Otherwise.

Why It Matters

Because a single extreme move can erase years of accumulated gains, traders who chase ultra‑low‑delta premiums risk catastrophic losses; focusing on higher‑delta strangles improves capital efficiency and protects portfolio stability.

Key Takeaways

• Low‑delta strangles collect tiny premiums but expose huge tail risk.
• Five‑delta strangles lose up to 44× credit in extreme moves.
• Twenty‑five‑delta strangles yield highest return per buying‑power unit.
• Outlier events can erase years of profits from low‑delta trades.
• Scaling contracts amplifies risk; prefer fewer higher‑delta positions.

Summary

The video challenges the common belief that ultra‑low‑delta option strangles are the safest way to collect premium. Using more than a decade of back‑tested data, the presenter shows that the tiny credits earned by 5‑delta strangles mask disproportionate tail risk.

The study examines 21‑day, managed strangles at 5, 16, 20 and 25 delta over 11 years, measuring profit‑and‑loss as a percentage of the credit received and of buying power. Without extreme market moves, the 5‑delta strategy retains about 31 % of its credit, but that figure falls to 18 % once outlier events like 2020 are included. By contrast, a 25‑delta strangle delivers roughly 1.16 % return on buying power per trade—more than double the 5‑delta result—because it captures substantially larger premiums.

The worst single loss recorded for a 5‑delta strangle was 44.2 × the credit received, whereas the 25‑delta counterpart lost about 13 ×. The presenter illustrates the point with Amazon options: a 5‑delta contract trades for $2 versus $10 for a 25‑delta, yet stacking five 5‑delta contracts to match the premium multiplies tail exposure ten‑ to‑fifteen‑fold.

The takeaway for options sellers is to size positions by credit‑to‑tail‑risk rather than by probability of profit. Higher‑delta strangles provide better risk‑adjusted returns and are less likely to be wiped out by a single market shock, making them a more prudent choice for systematic premium‑selling strategies.

Original Description

Options trading with a 5-delta strangle sounds safe because the win rate is 95%. Financial education through this Market Measures study shows exactly why that math falls apart when you size up to collect meaningful premium.

The worst single loss on a 5-delta strangle was 44 times the credit received.

For the 25-delta strangle it was 13 times. And when you scale up contracts on the 5-delta to match the credit of the 25-delta, you multiply the tail risk by 5 contracts, creating a spiral that can take years to recover from. The data covers 2015 to 2026 across COVID, the 2025 crash, and the April 2026 war move. The takeaway is clear: size based on credit and tail risk per unit, not on probability of profit.

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CHAPTERS:

00:00 The Question: Why Not Just Sell the 95% Pop?

01:15 Study Setup: 25, 20, 16, and 5 Delta Strangles vs 11 Years of Data

02:13 Average P&L as a Percentage of Credit Received

02:44 Higher Percentage Does Not Mean Better Total Profit

03:28 Tail Risk Before and After Outlier Moves: 2020, 2025, April 2026

04:00 Return on Buying Power: 25 Delta Wins at 1.16%

05:37 Wider Strangles Use Capital More Efficiently

06:55 The Worst Single Loss: 5 Delta = 44x Credit, 25 Delta = 13x

07:40 This Is One Position With No Rolling or Management

08:24 Why 5 Contracts of 5 Delta Is Not the Same as 1 of 25 Delta

09:25 The Spiral: More Contracts, Less Capital for Opportunities

11:17 Key Takeaway: Size by Credit and Tail Risk, Not Pop

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