Hello & TIA for looking. I'm trying to learn to paper trade options. I sold an Iron Condor 3 days ago (26th) on SPX @ 30 deltas with the IV of the short put = -.233 and the short call 16.7. Today the call delta is .26 with an IV of 15.7 and the put delta is .26 with an IV of 21.99. I thought that the deltas and IVs going down mean my buyback should be less. It turns out the trade down 5% off my risk $$. It's not that that big a deal but I wonder what I don't seem to understand. Insights other than market SNAFU?
Delta & IV down, Iron Condor Losing. Why?
- Thread starter Windy Nock
- Start date
Might be helpful if you give us the strike prices and value of SPX when you entered in and then we can inform you about the position based on today's movement.
sold the 1790/1810/1995/2015 condor when SPX was ~ 1897.35 ON 01/26/2016 14;37:51
any help would be appreciated. Profit had been up the $60-$150 the last couple of days. I hadn't been watching the Greeks. I might have expected the call deltas to move up today but they moved down. Today I wasn't surprised that it was down but I was surprised that the Greeks were what they were. I would have expected the Delta to have been lower, given the movement of the price action of the underlying and the IV, which they were. Yet, I thought that lower IV and lower delta translated into option price movement heading down. I'm not trying to be presumptive, I'm just trying to get a handle on this so I can get rich and be a bazillionaire like all the other option traders.
Oh, and they were Mar 16 options.
Tbh, the information as presented is fairly unclear; may explain why there have been no responses...from the information given I presume you are short the body and long the wings. I'll give it a 'go' on that basis.
If your position is short vegas and the position is showing a loss, this will be the result of the underlying moving too close/too quickly to one of the short strikes. The premium in the un-threatened vertical credit spread (i.e. one half of your position) would not have declined sufficiently enough to offset the delta losses incurred on the (now) threatened vertical credit spread.
Hope that is clear.
If your position is short vegas and the position is showing a loss, this will be the result of the underlying moving too close/too quickly to one of the short strikes. The premium in the un-threatened vertical credit spread (i.e. one half of your position) would not have declined sufficiently enough to offset the delta losses incurred on the (now) threatened vertical credit spread.
Hope that is clear.
Options is a TOP-DOWN process - you start at the underlying and base your option trades around your views of the future movement of the underlying. Your question is approaching options from the BOTTOM-UP - with the emphasis on the option greeks and the underlying being secondary.
The answer to your question is in the underlying not the option greeks - the IC is losing because the underlying has moved very close to one of your short strikes.