0DTE Iron Condor results

[Temujin79]

Take a look at this blogger who claimed he found a "breakeven Iron Condor 0dte strategy", except I don't understand how it's "breakeven" if he sets his stops at 1x the premium he's getting. When stops are hit he must buy back the Iron Condor and pay back the premium he took in, yet he claims to break even or with minor slippage.

https://www.sandvand.net/2022/08/21/learnings-from-0dte-breakeven-iron-condor/

Similarly this person uses a similar setup and states that her stops are set at 3x the premium from her Iron Condor but "it's really 2x loss if stops are hit because of the premium earned". Again, I don't understand why she is not counting the cost of buying back the Iron Condor when stops are hit.

 

[destriero]

1x the premium. $20 credit -> spot trades past strike 20 points -> cover IC. No way she's covering the IC for $20 even seconds before the close on LTD. Why of all things would you take financial advice from housewives and meth-heads on YT?

 

[Temujin79]

$20 credit -> spot trades past strike 20 points -> cover IC = pay $20 to close the legs + whatever the spot price is from the strike. There is no way it's a breakeven, not even theoretically possible correct?

 

[destriero]

$20 credit -> spot trades past strike 20 points -> cover IC = pay $20 to close the legs + whatever the spot price is from the strike. There is no way it's a breakeven, not even theoretically possible correct?

Theoretically? Sure, the counter-party could want to reduce inventory and trade at/under intrinsic I suppose. The convenience of avoiding taking delivery has a price.

 

[newwurldmn]

Theoretically? Sure, the counter-party could want to reduce inventory and trade at/under intrinsic I suppose. The convenience of avoiding taking delivery has a price.

what counterparty cares about that. And if so, someone else will trade with them first.

 

[destriero]

what counterparty cares about that. And if so, someone else will trade with them first.

ofc it's an auction market. I mean to trade at intrinsic. I stated shortly before the close. Market at 19.80 x 20.25 the thing may fill at intrinsic.

 

[Temujin79]

Guys I have a hypothesis of what they meant by "breakeven" - If the trade is place right when market opens the Theta is getting crushed and then the cost to close the legs will be about half of the premium received an hour or two into the market. Also they are placing the stops only on the short side, not sure how getting stopped on the short side affects the cost of closing the entire thing down.

 

[destriero]

Guys I have a hypothesis of what they meant by "breakeven" - If the trade is place right when market opens the Theta is getting crushed and then the cost to close the legs will be about half of the premium received an hour or two into the market. Also they are placing the stops only on the short side, not sure how getting stopped on the short side affects the cost of closing the entire thing down.

This is all broscience.

Right at the open? The open is most often the worst time to fill vol. Microstructure during a time where there is no real liquidity and the market in spot is going to be the widest NBBO. Half of the prem-received? OK, so mkt is up on the open, and NDX shits the bed for 1.5%. You're short cheap gamma.

Stops only on the short side? So you ignore dot shots? Mkt rallies 2% and you ignore it? Not closing the winning side at cab is an IQ test fail.

This is no way to approach it but I am glad these ppl out there are trading.

 

[Temujin79]

okay I agree but did you look at their return or risk/return ?

 

[destriero]

okay I agree but did you look at their return or risk/return ?

ofc, but only how it impacts the vol-surface as it's most of my volume (surface/switch trades).