Iron Condor

[MTE]

Quote from gkishot:

Is there any way to predict whether IV will remain steady or will rise sharply in the coming month? Isn't it what the charts above are doing?
How much would 'increases slightly' be in terms of the percentage?

You can't predict a sharp rise in IV since it is associates with "black swan" type of events.

 

[MTE]

Quote from thinkplus:

...MTE: That's very encouraging. What do you trade - index or stocks? How did you manage during those losing months? If you are still in black, you must have managed the losses well. e.g. if you make 3-5% for the other months, and (I agree, not easy to do all the time) but you contain your losses in that range, you might be in a better postion at the end.

do you follow R/S levles or go with set delta or a specific spread limit to manage the risk?...

I trade index options. It's a purely mechanical system based on volatility prediction, no R/S, delta or other stop loss.

The two big losers were Aug and Jan, with Jan having the max loss and Aug about 2/3 of the max. I also had a small loss in Sep, the rest of the months were all winners and with high IV the premiums were pretty good. Overall, the average winner was 3.8% per month and the average loser was 5.5%.

 

[gkishot]

Quote from MTE:

You can't predict a sharp rise in IV since it is associates with "black swan" type of events.

Is it possible to forecast in general whether IV will rise, fall or stay about the same in the coming days or weeks? What are the best tools available to do that?

 

[MTE]

Quote from gkishot:

Is it possible to forecast in general whether IV will rise, fall or stay about the same in the coming days or weeks? What are the best tools available to do that?

Well, that's for you to find out. I mean, if you could do that accurately then you'd have an edge. There are many tools to forecast volatility, however, as with everything else, there's no best.

 

[El OchoCinco]

Quote from tropicaltrader:

They work well when IV is declining or steady, or increases only slightly. Whether IV is high or low is irrelevant. They can do quite well in a high vol environment. If you wrote IC's in March when VIX was 26, you would have profited very handsomely. You have to adjust the width to account for higher IV.

If you're blowing out when IV increases a few percentage points or the spot moves 5% against you, you're too aggressive.

Well since August, IV had been spiking repeatedly versus the relative calm the prio couple of years. ICs in March may have done well but on average they would have been painful in every other month given the IV spikes. Doing them now certainly takes more balls and ulcers with economic news having way more significance. I do not miss them right now and will add them back when the environment cools a bit