SPX Iron Condor

[cantona777]

Quote from HowardCohodas:

Relying primarily on PoT and not market fundamentals or technical screening
You are correct to a point. I'm uncertain how you would apply these methods to an index such as the RUT (2000 stocks) in a meaningful way. If you believe that the price of the underlying and the price of their respective options already has this information, then the combination of PoT and price does a good job of integrating these concerns.

Delta management
Delta management is a natural consequence of two aspects of my strategy. First, although the credit spread is my trading entity, I aim to enter the companion spread to from an IC which will achieve a nearly delta neutral portfolio position. This is achieved in more than 90% of the spreads I've entered.

Once the spreads are entered, delta changes over time. I do not make adjustments based on my observation of delta, however closing spreads that have achieved most of their return and opening a new spread to reform the IC does, in fact, readjust delta toward being delta neutral once again.

IV
Most of the trading has been in low volatility environment. However, a significant component of PoT is IV and recent higher volatility has show that it adjusts appropriately.

HC,

First of all I didn't intent to flame in any way or form as there is enough flaming going on in this forum. I appreciate your trade log as it is an important learning tool.

Yes, fundamental analysis is quite difficult on an index. I would apply to more to ICs on individual stock and look at wider market conditions for index ICs.

As for deltas I have been utilizing techniques from Kerry
 W.
Given, Surviving The Iron Condor paper and some from Dan Sheridan's webinars on CBOE.

Apologies if I have missed it in your trade journal, but I would be keen to find out what sort on entry/exit/adjustment rules you have in place in your trade plan.

Regards,
R

 

[HowardCohodas]

Quote from cantona777:

HC,

First of all I didn't intent to flame in any way or form as there is enough flaming going on in this forum. I appreciate your trade log as it is an important learning tool.

Yes, fundamental analysis is quite difficult on an index. I would apply to more to ICs on individual stock and look at wider market conditions for index ICs.

As for deltas I have been utilizing techniques from Kerry
 W.
Given, Surviving The Iron Condor paper and some from Dan Sheridan's webinars on CBOE.

Apologies if I have missed it in your trade journal, but I would be keen to find out what sort on entry/exit/adjustment rules you have in place in your trade plan.

Regards,
R

Forgive me if my response seemed inflammatory. Sometimes I focus so much on the details, that I forget to reread what I wrote to see if it comes off as civil discourse.

Thanks for the reference to Kerry & Givens. I had not come across it before.

This is the checklist I use for my index options credit spread trading. I trade the NDX and the RUT.

Credit Spread Entry Rules

• Enter new weekly as soon as quarantined funds are released.
• Enter new monthly (around 60 days to expiration) as soon as quarantined funds are released.
• Short strike PoT target: 20%, maximum 22.5%.
• Target credit for Iron Condor is 10%.
• Minimum credit for any credit spread is 3%.

Credit Spread Management Rules

• Opportunity - If spread reaches 80% of its capped yield and if there is another spread in the same series that meets entry criteria, then place a limit order to close. After close, enter new spread is same series if entry criteria still met.
• Jeopardy - If spread has lost more than 20% of capital at risk, exit. If another spread in the same series meets entry requirements, then enter.

Credit Spread Exit Rules

• If spread is still open in last hour of last day of trading, then exit if Probability of Touching is > 10%. Otherwise, let it expire.

I've recently completed an asset allocation model to help manage my risk in multiple dimensions. I'm still working on putting it into words that are readable by someone who was not the developer.