Selling the 0.1-delta strangle — does far-OTM actually protect you?

Most retail backtests can only pick strikes by distance — "200 points OTM." But an option's real risk is its delta, and delta changes with volatility every single day. So we did it properly: for every NIFTY strike, each day, we backed out the implied volatility from its 9:45 AM price, computed its Black-Scholes delta, and sold the call and put sitting nearest 0.10 delta — then bought both back at 3:20 PM. Two years, 486 sessions.

The selection was clean: the average call we sold carried a 0.099 delta and the average put −0.099. Genuinely far-OTM, chosen by the Greeks rather than a fixed point-distance.

A 77% win rate — as designed

Selling 0.1-delta options means, roughly, a 90% chance each stays out of the money. The strategy won 77.4% of days and netted +988 points with a Sharpe of 1.44 — a much smoother ride than the ATM straddle, and a shallower drawdown (−336 points).

Takeaway

Delta-based selection does what it promises — a higher hit rate and a smoother equity curve than selling ATM. But the payoff shape is still short-volatility: many small wins funding occasional large losses. "Far-OTM" buys you comfort, not safety. Position sizing for the −24 days, not the +9 ones, is what keeps you in the game.