Iron Condor candidates
- Thread starter Pekelo
- Start date
indexes : better commission, better slippage, your trading the vol of 500 stocks, more backtest done on them , less outlier moves than indexes, currencies , commodities
What is your horizon?? You must match it to the underlying.
(Look at their option chain from expiry to expiry: look for discontinuities.
If, by going from weekX to weekX+1, you are not getting at least your current portfolio-wide ROIC, consider looking elsewhere. (Or, at least *rank* them, and pick after other considerations.)
The IC underlying should be valued well above the differences between strike prices, so that you can best target the P(ITM) against the revenues received and margin consumed. (To answer another question: I prefer ES/SPX, as the $5 strikes allow for fair targeting on a $2300 underlying...)
FWIW, I aim for |0.20| deltas, top and bottom, on $5 widths, and/or >$1 total. I follow the SPX (and major constituents) closely, and may easily go |0.10| on one side, adn |0.30| on the other.
I put up both ICs and verticals, and work both until I am in where I want to be. Sometimes one gives me just what I want; sometimes I have to wrestle with the top, the bottom, or both. Despite being a bread&butter trade, I have yet to see a particular, lasting, pattern to that.
Two notes:
1) The volume on the monthlies (3rd week) is 5-8 times the volume of the weeklies, and THE BID-ASK SPREAD is ALSO 5-8 times the weeklies, for the risk of going Thursday close to Friday open with no viable exit.
2) If you enter with an intention to exit (e.g., sell 6 weeks out, buy-to-close 3 weeks out), make sure your owned strikes are in big, whole numbers that will sell easier. When the time comes, you can buy back your short with an order placed maybe 24 hours prior, but the sale of your far-OTM, single-strike, long position WILL LANGUISH if it's at 2205, for example, versus 2200. It's worth a little more risk, or a little less coin, to go to 2200.
(Look at their option chain from expiry to expiry: look for discontinuities.
If, by going from weekX to weekX+1, you are not getting at least your current portfolio-wide ROIC, consider looking elsewhere. (Or, at least *rank* them, and pick after other considerations.)
The IC underlying should be valued well above the differences between strike prices, so that you can best target the P(ITM) against the revenues received and margin consumed. (To answer another question: I prefer ES/SPX, as the $5 strikes allow for fair targeting on a $2300 underlying...)
FWIW, I aim for |0.20| deltas, top and bottom, on $5 widths, and/or >$1 total. I follow the SPX (and major constituents) closely, and may easily go |0.10| on one side, adn |0.30| on the other.
I put up both ICs and verticals, and work both until I am in where I want to be. Sometimes one gives me just what I want; sometimes I have to wrestle with the top, the bottom, or both. Despite being a bread&butter trade, I have yet to see a particular, lasting, pattern to that.
Two notes:
1) The volume on the monthlies (3rd week) is 5-8 times the volume of the weeklies, and THE BID-ASK SPREAD is ALSO 5-8 times the weeklies, for the risk of going Thursday close to Friday open with no viable exit.
2) If you enter with an intention to exit (e.g., sell 6 weeks out, buy-to-close 3 weeks out), make sure your owned strikes are in big, whole numbers that will sell easier. When the time comes, you can buy back your short with an order placed maybe 24 hours prior, but the sale of your far-OTM, single-strike, long position WILL LANGUISH if it's at 2205, for example, versus 2200. It's worth a little more risk, or a little less coin, to go to 2200.
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So you want to do a strategy but asking other people for the criteria you should choose to select where to put your money?
The main advantage of using indexes over stocks is that you don't run the risk of a stock upgrade or downgrade by some analyst, or a surprise news report on the company, or an unexpected news release by the company, that causes your stock to blow through one side of your IC causing you a "max loss" on the trade without the opportunity to defend the trade or exit at a reasonable loss.
One more very important point on selling ICs. You have to be conscious of your maximum risk at any one time. This is an odds on trade in that most of your trades should be profitable depending on how far out you go on the options that you sell. But, there is still a tight move that can create a "max loss", so it would not take too major of a news event to spike the market down through "ALL" of the "PUT" sides of your IC positions creating a "max loss".
Thanks everyone for the informative responses. I got an idea for a IC/butterfly combo so instead of making a separate thread, I will ask it here:
I sell an IC and I buy 1-1 butterfly calls/puts. I am not sure if there is a name for it, so I break it down using TSLA currently at $257.5 DTE is 38 in March:
SELL IC 250/255/260/265 for $435 credit - $13 com. breakeven range 250.6-264.3
BUY BF puts 255/S(2)250/245 for $31 max. win $482 range 245.2-254.8
BUY BF calls 260/s(2)265/270 for $43 max. win $470 range 260.3-269.7
Now you might ask, why did I do a combo? Well, this one has an extended range of 245.2-269.7, it has 3 sweet spots with maximum win and it is rather cheap, less than 90 bucks.
Am I over complicating this, and is there an easier way to achieve similar range and cost/win ratio?
OK, after tinkering with the IC alone, without the butterflies, if I sell the
245/250/265/270 I get the breakeven range to 246.1-268.9 that is pretty similar, but the max. win is only $387 with a max. loss of $113 - 13 com
So everything is worse than in my combo...
I sell an IC and I buy 1-1 butterfly calls/puts. I am not sure if there is a name for it, so I break it down using TSLA currently at $257.5 DTE is 38 in March:
SELL IC 250/255/260/265 for $435 credit - $13 com. breakeven range 250.6-264.3
BUY BF puts 255/S(2)250/245 for $31 max. win $482 range 245.2-254.8
BUY BF calls 260/s(2)265/270 for $43 max. win $470 range 260.3-269.7
Now you might ask, why did I do a combo? Well, this one has an extended range of 245.2-269.7, it has 3 sweet spots with maximum win and it is rather cheap, less than 90 bucks.
Am I over complicating this, and is there an easier way to achieve similar range and cost/win ratio?
OK, after tinkering with the IC alone, without the butterflies, if I sell the
245/250/265/270 I get the breakeven range to 246.1-268.9 that is pretty similar, but the max. win is only $387 with a max. loss of $113 - 13 com
So everything is worse than in my combo...
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