Iron Condors

MTE · Jan 8, 2009

Quote from gkishot:

That makes sense because my backtested results are about 100% in a good year and 100% loss in a bad year. I guess it all depends on the width of the spread. My spreads are very wide. And I don't do legging in. Thank you for your reply.

Generally, I don't leg in either. I place my shorts about 1 standard deviation away.

100% in good and -100% in bad years sounds like your position size is too large relative to the total account.

gkishot · Jan 8, 2009

Quote from SmithTheTrader:

So your return is 0% (after commision) ?:eek:

Maybe it's 15-20% profit after commisions.

MTE · Jan 8, 2009

Quote from SmithTheTrader:

So your return is 0% (after commision) ?:eek:

No, that's after commissions.

gkishot · Jan 8, 2009

Quote from MTE:

Generally, I don't leg in either. I place my shorts about 1 standard deviation away.

100% in good and -100% in bad years sounds like your position size is too large relative to the total account.

I mean 100% of my IC margin not of my total account. I guess you mean the same thing: 15-20% of IC margin, right?

spindr0 · Jan 8, 2009

If you think you can time the market and leg-in properly, then you not even need to trade iron condor, a simple long call/put or even stock will do.

There's a huge difference b/t "timing the market" and riding some intraday momentum to nab a better fill. Though I may be uneven intraday depending on my bias, particularly with my pairs trading (stock), I never go overnight with any consequential imbalance.

MTE · Jan 8, 2009

Quote from gkishot:

I mean 100% of my IC margin not of my total account.

I see, my figures are based on the total account return. My average monthly exposure is around 10%. That is, if the underlying expires outside the long strikes then my loss for the month is 10% of the total account.

gkishot · Jan 8, 2009

Quote from MTE:

I see, my figures are based on the total account return. My average monthly exposure is around 10%. That is, if the underlying expires outside the long strikes then my loss for the month is 10% of the total account.

Would your loss be like about 100% of your IC margin? Do I understand you correctly?

MTE · Jan 8, 2009

Quote from gkishot:

Would it be like about 100% of IC margin? Do I understand you correctly?

It would be the max loss in an IC, which is the difference between the short and the long strike less premium received.

For example, say I got a $100K account. I sell a 10-point (10 points is the distance between the long and the short) IC on the SPX at 3 points. Since I'm willing to risk 10% of my account, I can sell 14 spreads (10% of 100K is 10K and my risk per spread is 700).

dagnyt · Jan 8, 2009

Quote from gkishot:

Would your loss be like about 100% of your IC margin? Do I understand you correctly?

When you buy an iron condor (sell put and call spreads) and the strikes are 10 points apart, the margin is $1000.

That $1000 margin requirement - minus the cash you collected - represents the max loss.

Mark

SmithTheTrader · Jan 8, 2009

Quote from MTE:

I see, my figures are based on the total account return. My average monthly exposure is around 10%. That is, if the underlying expires outside the long strikes then my loss for the month is 10% of the total account.

This means you can only get blow up if you loss 10 times in row ? You seemed really conservative