I’ve used timeframes as low as 7 DTE, but find that many one day moves can push a position out of the profit zone, and I find myself fighting a losing battle too often. I use 28-35 days to expiration (DTE) because my position can tolerate most reasonable moves while still having decent decay. Other indexes or even individual stocks can be used, but managing can tougher with bigger moves, less expirations, and less liquidity. Depending on account size or type, other option products for the S&P 500 may be appropriate and can be used instead with essentially the same strategy. It is also very liquid to trade, has tax advantages in taxable accounts, and has expirations multiple times per week in the timeframes I trade. I use SPX because it is the least likely underlying to have outsized moves. For the above example trade, the goal is to keep in the profit zone for the first several days of the trade- the positive area under the 21 DTE curve. In this example 30% of the wing width was collected, and a little lower deltas were used. Here is the setup of an actual trade from early 2022 on SPX using the criteria from this post. With implied volatility between 20 and 30%, I generally target 100 wide wings, with the body between the short put and short call of around 15o points on SPX. I like equal width for the put side and call side, so the Delta values for calls will be a bit wider than the put side, and the net Delta of the Iron Condor will be slightly negative. What I have determined works best for my management strategy is to use the S&P 500 index options (SPX), targeting a starting point 28-35 days from expiration, with option Delta values of 30 for the short strikes and around 20 for the long strikes. Wings that are different widths might be call unbalanced, or broken wings, as the profit profile will no longer be equal levels each end of the price ranges of the trade. The wings on the puts may be equal in width to the wings on the call, or they may be different. The wings are difference between the call strikes or between the put strikes. The body is the difference between the short put strike and the short call strike. To build on the condor metaphor, the difference in option strikes are often referred to as the body and wings of the combination trade. An example of a put condor is the broken wing put condor strategy I have described in a separate post. The iron part of the name designates that it is made up of a combination of puts and calls, as opposed to a put condor, or call condor which has four legs of the same type of contract. Here is an actual California Condor with a profit curve of an Iron Condor option trade drawn over it.Īn Iron Condor is named after the shape of the profit curve at expiration, which kind of looks like a condor with a bit of imagination, kind of like how star constellations are named. However, I rarely if ever hold to expiration and roll my position way before expiration is a concern. The trade wins at expiration if the price ends up between the short strikes, and hits max loss if the price moves beyond one of the long strikes. Usually, an out of the money put and out of the money call are sold, and then a further out of the money put and call are purchased to define the risk and reduce cost. The strategy is a combination of two calls and two puts, four separate options working together. Selling Iron Condors is an extremely common option trading strategy. ![]() Over time I saw that some of my set ups and management strategies were working better than others, so I investigated and came up with a process that now works well in the current bear market environment. I started adding credit call spreads to my credit put spreads to balance risk and have a neutral strategy. But then 2022 came along, and it was clear that the market was no longer going up, and that we were heading for a bear market. So, I switched to mainly put spreads and other short put strategies, which did great. Initially, I liked the idea of making money on both sides, but I found in a constant up market, I often lost more money from calls than I made from puts. ![]() ![]() ![]() I had discarded the Iron Condor trade because I found I was always losing on the call side of the Iron Condor. My goal is to maintain a position that can tolerate fairly big market moves up or down, while benefiting from time decay. The Iron Condor is primarily a neutral trade that when managed with aggressive rolls can provide good returns in choppy, down-trending markets. In the bear market of early 2022, I re-discovered a strategy that I had mostly discarded during the bull market of the preceding years, the Iron Condor.
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