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Opinion on iron condor strategy


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Opinion on iron condor strategy

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  #1 (permalink)
Prophet85
Gothenburg Sweden
 
 
Posts: 67 since Jul 2019
Thanks: 51 given, 18 received

Hi,

I have been playing around on my simulation account and testing out different iron condor trades on SPY/SPX/ES futures.

I am trying to "streamline" the process and so far my plan is to try to sell an iron condor every 2 weeks with around 45 days to expiration each time. I will close the position at around 50 % profit of the max. If one side gets tested I am planing to roll the untested spread closer to collect some premium to decrease the losses. I obviously know that it is not optimal to streamline an iron condor like this but honestly I just want to try it and not think too much about it. I do swing trading with stocks and algorithmic trading with futures so my options account is just a very small part of my trading account that I am willing to "experiment" with.

Now my problem is that I am a bit unsure of how far out I should sell the spreads. I have figured out that using delta might be a good choice to choose what strikes to choose. I am leaning towards selling delta 10 and buying delta 5 on both the call and sell sides. This gives a pretty high chance of probability for success per trade but maybe I am playing it too safe? I see many using delta 16 for the sells.

Does anybody with experience have any advice on what deltas would be optimal in this type of situation? What's the benefit of selling the options closer to the money as opposed to further out? Any other advice? Like maybe the 60 DTE would be better compared to 45 DTE?

Any advice would be appreciated!

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  #2 (permalink)
 Silver Dragon 
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Prophet85 View Post
Hi,

I have been playing around on my simulation account and testing out different iron condor trades on SPY/SPX/ES futures.

I am trying to "streamline" the process and so far my plan is to try to sell an iron condor every 2 weeks with around 45 days to expiration each time. I will close the position at around 50 % profit of the max. If one side gets tested I am planing to roll the untested spread closer to collect some premium to decrease the losses. I obviously know that it is not optimal to streamline an iron condor like this but honestly I just want to try it and not think too much about it. I do swing trading with stocks and algorithmic trading with futures so my options account is just a very small part of my trading account that I am willing to "experiment" with.

Now my problem is that I am a bit unsure of how far out I should sell the spreads. I have figured out that using delta might be a good choice to choose what strikes to choose. I am leaning towards selling delta 10 and buying delta 5 on both the call and sell sides. This gives a pretty high chance of probability for success per trade but maybe I am playing it too safe? I see many using delta 16 for the sells.

Does anybody with experience have any advice on what deltas would be optimal in this type of situation? What's the benefit of selling the options closer to the money as opposed to further out? Any other advice? Like maybe the 60 DTE would be better compared to 45 DTE?

Any advice would be appreciated!


Hi @Prophet85

Typically, somewhere between 16 delta and 30 delta are the key areas I have seen for the Iron Condor. See screenshots below;

If you sell closer to the money at the 30 delta then your POP will be lower but your Max Profit and BP reduction will be higher and the profit zone will be smaller.

Further out at the 16 delta your POP is higher but your your Max Profit and BP reduction will be lower.

At the end of the day it really depends on your risk appetite and account size.

Robert

Note: screenshots are for ES 41 DTE based on Fridays close.

IC 30 delta


IC 16 delta

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  #3 (permalink)
Prophet85
Gothenburg Sweden
 
 
Posts: 67 since Jul 2019
Thanks: 51 given, 18 received



Silver Dragon View Post
Hi @Prophet85

Typically, somewhere between 16 delta and 30 delta are the key areas I have seen for the Iron Condor. See screenshots below;

If you sell closer to the money at the 30 delta then your POP will be lower but your Max Profit and BP reduction will be higher and the profit zone will be smaller.

Further out at the 16 delta your POP is higher but your your Max Profit and BP reduction will be lower.

At the end of the day it really depends on your risk appetite and account size.

Robert

Note: screenshots are for ES 41 DTE based on Fridays close.

IC 30 delta


IC 16 delta

Thank you for taking your time to answer!

Do you think that there might be any problem to roll (due to low liquidity) the untested side the further out of the money you are?

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  #4 (permalink)
 SMCJB 
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From another thread... Old Posts but maybe prevalent to you.


SMCJB View Post
Came across these 3 year old video's by Andrew Falde of www.lessthanrandom.com and now SMB that I thought some of you hear might find interesting. Unlike @ron99 's naked option selling Andrew is selling Verticals and legging into iron condors. His regression analysis is an interesting way to time his trades and something he later coins into "LRC" or Linear Regression Channels. At about 40 mins into the first video he talks about buying back his options once a signidifcant part of the return has already been captured, something @ron99 has preached about here.

The second and third video's are a little more specific to his trading strategy but the first video is probably a good (and easy) watch for most people.

Using Regression Analysis for Higher Probability Credit Spreads by Andrew Falde
How to Sell Higher Probability Credit Spreads Part 1
How to Sell Higher Probability Credit Spreads Part 2
LRC Credit Spreads Back Testing Results


SMCJB View Post
DTR Trading: 73 DTE Iron Condor Results Summary
73 DTE Iron Condor Results Summary
This article reviews the backtest results for iron condors (IC) entered at 73 days to expiration (DTE). These tests covered 9 IC variations, with short strike deltas at four locations (8, 12, 16, 20), utilizing 12 exits. In all, there were 432 test runs (9 variations x 4 deltas x 12 exits). Each test run executed an average of 174 SPX IC trades between the January 2007 expiration and the September 2016 expiration. A total of 432 ten year backtests. I used weekly options for this testing, so there were more than 12 trades per year. In total, there were 75,096 total trades entered for the 73 DTE testing.


datahogg View Post
This video seemed interesting.



SMCJB View Post
Thanks @datahogg very interesting. There's a guy (Dave!) on Twitter @ DTRTrading, who has a blog dtr-trading.blogspot.com that has a lot of very similar iron condor analysis. I've read some of it but not all of it.

The blog dtr-trading.blogspot.com has a huge amount of iron condor analysis.

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  #5 (permalink)
Prophet85
Gothenburg Sweden
 
 
Posts: 67 since Jul 2019
Thanks: 51 given, 18 received

Thank you SMCJB!

I will look through all of the links you posted.

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  #6 (permalink)
 Silver Dragon 
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Prophet85 View Post
Thank you for taking your time to answer!

Do you think that there might be any problem to roll (due to low liquidity) the untested side the further out of the money you are?

Disclaimer: I have never really traded ES. However, they are very liquid. If you roll it 21 days out then I dont think there would be an issue. The closer you get expiration then it may be a different story. I know some traders let the untested just expire worthless.

Robert

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You make your own opportunities in life.
Visit my futures io Trade Journal Reply With Quote
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  #7 (permalink)
Donny Hetzer
Minsk, Belarus
 
 
Posts: 1 since Dec 2020
Thanks: 1 given, 0 received


Prophet85 View Post
Hi,

I have been playing around on my simulation account and testing out different iron condor trades on SPY/SPX/ES futures.

I am trying to "streamline" the process and so far my plan is to try to sell an iron condor every 2 weeks with around 45 days to expiration each time. I will close the position at around 50 % profit of the max. If one side gets tested I am planing to roll the untested spread closer to collect some premium to decrease the losses. I obviously know that it is not optimal to streamline an iron condor like this but honestly I just want to try it and not think too much about it. I do swing trading with stocks and algorithmic trading with futures so my options account is just a very small part of my trading account that I am willing to "experiment" with.

Now my problem is that I am a bit unsure of how far out I should sell the spreads. I have figured out that using delta might be a good choice to choose what strikes to choose. I am leaning towards selling delta 10 and buying delta 5 on both the call and sell sides. This gives a pretty high chance of probability for success per trade but maybe I am playing it too safe? I see many using delta 16 for the sells.

Does anybody with experience have any advice on what deltas would be optimal in this type of situation? What's the benefit of selling the options closer to the money as opposed to further out? Any other advice? Like maybe the 60 DTE would be better compared to 45 DTE?

Any advice would be appreciated!

Hello Prophet85.

How is it going?

How is success with this strategy?

I'm currently testing the same strategy on SPX with different types of DTE (45,30,15) and different ranges.
So I would really appreciate your experience with this.

Thanks in advance!

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  #8 (permalink)
Prophet85
Gothenburg Sweden
 
 
Posts: 67 since Jul 2019
Thanks: 51 given, 18 received


Donny Hetzer View Post
Hello Prophet85.

How is it going?

How is success with this strategy?

I'm currently testing the same strategy on SPX with different types of DTE (45,30,15) and different ranges.
So I would really appreciate your experience with this.

Thanks in advance!

Hi.

I have been using SPY and so far I have been doing ok. I use approximately 45 DTE. It should be noted that IV has been pretty high since I started which to my understanding is when thiabtrade worls the best. I should also mention that the last 2 trades are cutting it really close to being losers cause the market has been steadily going up. I am not sure if streamlining a process like this is the best way cause one loss could wipe out many previous wins (low risk reward).

I'm going to continue for a while with only one SPY Iron Condor trade and maybe later scale up.

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