Delta Hedged Short Straddle BTC Strategy

Valuation and hedging of cryptocurrency inverse options: with backtest simulations using Deribit options data

AuthorsArtur Sepp; Vladimir Lucic

Paper linkhttps://papers.ssrn.com/sol3/papers.cfm?abstract_id=4606748

Trade BTC (or ETH) options using a delta-hedged short straddle. Sell at-the-money calls and puts, reroll weekly, and delta-hedge hourly. Positions are held to maturity, with portfolio sizing based on account value.

Delta-hedging captures volatility risk premia while mitigating directional risk. Frequent rolls allow consistent option-selling through market cycles, harvesting risk premia more efficiently than unhedged strategies.