Contraction Short Strike Delta
Setting key
contraction_short_strike_delta
Default
0.16
What it does
Short strike delta for contraction engine structures. 0.16 delta places the strikes at approximately one standard deviation OTM, roughly an 84% probability of expiring worthless. Tighter than the mechanical engine's 0.20 because contraction trades are shorter-dated with more gamma risk.
When to change it
Raise to 0.20-0.25 for more premium but higher risk of being tested. Lower is not meaningful: 0.16 is already near one standard deviation.
Safe range
0.12 (very wide) to 0.25 (tighter breakevens).
Example
AMD at $150. IV spike scenario. 0.16 delta put strike approximately $130, 0.16 delta call strike approximately $172. The condor survives a 13-15% move in either direction.