Trading the Iron Condor Strategy for monthly income

wagross said:
idk... month after month I'm writing more credits than debits in the aggregate, to the tune of 6-8% of my capital per month. I haven't had the energy to record and follow every entry to its conclusion (some 60 trades each month), as my friend suggested to me, that is until this month. So we'll see, as all the recorded trades expire by the end of September. My seat of the pants conclusion is: a few substantial winners, many marginal winners and an occasional downright loser.
I tend to roll the tested side for a debit, roll the untested side for a small credit, to re-center the trade and then try to hold the trade as long as possible to take advantage of theta.
For sure I could do better, which is why I started this thread. But I'm not ready to abandon the strategy for some unnamed better strategy.
I'm always working on new ideas: most recently selling ITM call spreads for a down market.
Meanwhile thanks again for your substantial input.
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Have you heard of the wheel?
 
wagross said:
I'm constantly tinkering with the Delta for my strikes and the width of my wings for my 45-60 DTE trades.
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Instead of being fixated on just Delta, I think it might be beneficial if you’d:

1) view / manage the IC with its individual sub-components, instead of just seeing it as a combo

2) understanding how to prioritize the risk of each component

3) being able o determine cheap vs expensive for each component

45-60 DTE is a long time (even if you exit early) and many things can happen during that period. Therefore, being able to read the market can make a huge difference.
 
wagross said:
thanks, but i don't understand what you mean when you refer to "components" and "sub-components"
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Butterfly is combination of bull & bear vertical (puts or calls) sharing the short strike

Condor is stretched out butterfly (combination of butterflies and verticals, ie. subcomponents)

For example, if you’ll dissect the iron condor into verticals or into butterflies, then you can see what is “under the hood”, and then you can assess which component is cheap vs expensive, where the risk is, and so on.

You can learn a lot from his book:

Options Trading: The Hidden Reality - Ri$k Doctor Guide to Position Adjustment and Hedging
 
destriero said:
It's a HODL-position. It's by nature impossible to hedge. Rolling is simply loss avoidance as you're not interesting in the vol-line. Think of yourself as on step 3 of the 12-step program.
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Try telling that "loss avoidance" thing to the guys who ran UBS' CYES or Harvest's IC products.

Top shops don't "roll" anymore- this is why the market (which was always = dealers long gamma) is actually behaving like dealers are long gamma.
 
Schwab has a quantitative - volatility-based-IC finder in the mobile app and SSE. Called the Idea Hub. Won't show up if you're not suitable, but that could have changed.

Using the “Income” Screens:
Income is an Idea Hub Screen grouping in which screens related to generating additional income are located. The Income is broken into the following groups:

Premium Harvesting: Provides a variety of market neutral, slightly bearish, and slightly bullish credit spread ideas using a combination of iron condor strategies and credit call and put spread strategies. Ideas consist of broad-based indices, popular ETFs, and high volume stocks using strike prices that are generally one standard deviation or more (using the 30 day At-The-Money IV Average) from the current underlying price within the expiration timeframe within a minimum of a $0.25 credit per spread.

The following methodology is used to identify volatility across stock indices, ETFs, and individual stocks

  • Implied volatility is measured by using a weighted average of the At-The-Money (ATM) call and put options for each underlying security

  • Ideas are generally one standard deviation or more (using the 30 day At-The-Money IV Average) from the current underlying price

  • Only ideas with a minimum credit of $0.25 are displayed

  • In addition, we filter the underlying symbols for the following criteria:
    • Minimum average daily option volume of 5,000 contracts

    • Minimum average daily stock volume of 1,000,000 shares

    • Underlying price greater than or equal to $10
  • The ideas displayed are then sorted based on the highest return on risk percentage (calculated as the credit received divided by the maximum risk of the trade)
In addition to the above criteria, certain leveraged and inverse ETF/ETN products are filtered from display, including VXX, UVXY, and SVXY.

The results can be further refined by selecting one of the following filters:

  • Show only index products
  • Show only non-index products
  • Show all products
 
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You can create it yourself. Capture the implied of the atm pair - CBOE actually calculates a metric for about a dozen symbols. That's an annualized estimate - convert it to a one-month estimate or convert it to your own relative time period. Essentially a back of the envelope calculation - not perfect but OK. That's is your OTM distance. The width of the condor is your risk tolerance. All things being equal and assuming the options you're looking for are efficiently priced. The Iron Butterfly is a tad better. Higher friction because you trade and monitor it more. The Idea Hub uses a constant time period, but that relates more to the retail mindset than anything else. It will be very dependent on your overall trade friction - friction being direct costs, spread, and slippage. Not an uncommon methodology in the institution community.
The explanation can be made a lot more complicated.
Futures options, where there is decent pricing, can be a real viable choice. Crap pricing can often make it better. Assume you will always overpay for the long legs.
Our shop GENERALLY has a ton of them on at any time. Obviously, try to be out for events that may create gaps - easier said than done. Again very popular in retail with European settlement index options. Retail often views it as risk-managed premium selling. AM settled options are a plague.
 
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I re-read the post, a couple of times. Frankly I’m kinda mystified by many of your terms-I’m just a Schlepper from the West Side.
But I think what you’re referring to is contained on the Tastytrade trade page- particularly their “expected move +/-“. Also the page has the standard deviation and “IVx”.
Like I said at the top, I’m mostly choosing my strikes based on Delta, generally 20/20 unless I have a directional bias.
I COULD be much more discerning regarding my stock selection. Obviously trading something like 50-60 stocks a month may or may not be ideal. The infamous “shotgun approach.”
Then, of course, prayer is an integral component of my trading.
For your contribution to this thread I thank you.
 
Speaking of 50-60 stocks, I’m considering carefully the width of my wings. I’m overwhelmingly using $5 wide wings. Given the math, that’s just about all I can afford.
Tastytrade’s research suggests wings at like 10% of the underlying. Yikes! For SPY that’s a $30-$40 wide wing
 
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