Delta Hedging Short Puts on Leveraged ETFs: Strategies and Performance

This episode explores strategies for delta hedging short put options on highly volatile 3x leveraged ETFs like TQQQ and SOXL between 2017 and 2024. It compares the performance of at-the-money (ATM) versus out-of-the-money (OTM) puts, as well as full versus partial delta hedging, across different rebalancing frequencies (daily, weekly, event-triggered) and between static and dynamic hedging. The analysis measures annualized return, Sharpe ratio, volatility, drawdown, and win rate to determine the best practices for balancing risk and reward when trading options on these risky assets. Ultimately, it concludes that delta hedging significantly improves the risk-adjusted returns of short put strategies on leveraged ETFs, with dynamic and event-triggered rebalancing being crucial for effectiveness