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| Kevin_in_GA 4,599 posts msg #121663 - Remove message |
10/6/2014 6:43:32 PM OK - a small amount of shameless self-promotion for Pangolin IC. If I have done the code right it should update automatically. The first month or so I was still working out some of the kinks - it ended up fine in the end but was fairly tense at times. Now I focus on taking a little less risk and less return but still focused on 1-2% per week. |
| mahkoh 1,065 posts msg #121870 - Remove message modified |
10/31/2014 5:48:14 PM Kevin, I noticed that when buying condors where the sold legs are around 10 % delta the possible profit is usually about $125 for every $ 1000 at risk. It doesn't really make a difference whether you place the trade 4,5 or 10 days before expiration. The thing that changes is that the size of the body (the difference between the sold strikes) diminishes the closer you get to the expiration date. This of course makes sense as the underlying has less time to make a move outside the sold strikes. You choose to make the trade 9 days before expiration, is that arbitrary or did you quantify that as optimal? There is one other thing that I find a bit unsettling: On the Friday before expiration the 10 % delta strikes are roughly 2.5 % away from the underlying. Looking at the last 250 weeks however it turns out that SPX actually made 50 weekly moves that were larger than 2.5%. So the market assumes 10 % chance for a move that historically happened 20 % of the time? - Just realized that the 10 % chance only represents one leg. Add the other leg and you get 20 %, so it is actually pretty accurate.- |
| Kevin_in_GA 4,599 posts msg #121876 - Remove message |
11/1/2014 11:08:38 PM Kevin, I noticed that when buying condors where the sold legs are around 10 % delta the possible profit is usually about $125 for every $ 1000 at risk. It doesn't really make a difference whether you place the trade 4,5 or 10 days before expiration. The thing that changes is that the size of the body (the difference between the sold strikes) diminishes the closer you get to the expiration date. This of course makes sense as the underlying has less time to make a move outside the sold strikes. I'm seeing that for the weekly options I use in Pangolin IC, the typical delta 0.1 short strike is priced at between 0.12 and 0.15, and the further OTM strike is usually 0.07 to 0.10 You choose to make the trade 9 days before expiration, is that arbitrary or did you quantify that as optimal? A little of both - you can often get a premium of 0.10-0.12 that many days out with not a lot more risk than if you are 4-5 days out (this week being a hard learned exception to that rule - all three ICs were busted, with both the SPY and GLD condors taking the maximum loss of $4000 each). This week wiped out essentially all of the profit since mid-April. There is one other thing that I find a bit unsettling: On the Friday before expiration the 10 % delta strikes are roughly 2.5 % away from the underlying. Looking at the last 250 weeks however it turns out that SPX actually made 50 weekly moves that were larger than 2.5%. So the market assumes 10 % chance for a move that historically happened 20 % of the time? - Just realized that the 10 % chance only represents one leg. Add the other leg and you get 20 %, so it is actually pretty accurate.- I would put this filter forth as a counter-argument: in the last 100 weeks there have been 10 weeks where the absolute movement of SPY was greater than 2.5%, which jibes exactly with the delta estimate of this occurring. |
| mahkoh 1,065 posts msg #121877 - Remove message modified |
11/2/2014 3:42:48 AM I rechecked my data and it appears we are both right. During the last 250 weeks ^SPX made 45 weekly moves beyond 2.5 % (18%) , but in the last 100 weeks it occurred only 9 times (9 %). Note that I used SPX data; as Edellner mentioned earlier it saves a bunch on commissions. |
| Kevin_in_GA 4,599 posts msg #121879 - Remove message |
11/2/2014 9:48:57 AM Agreed, but during that longer period which included big drops and gains, you do not know how far the 0.1 delta strikes were at that time. All we do know is that recently they are positioned 2.5% away and that is consistent with the current risk. |
| mahkoh 1,065 posts msg #121881 - Remove message |
11/2/2014 4:06:57 PM It would probably be a combination of the strikes being a bit further away and some more premium received to take the risk. One thing you may want to think about is selling contracts with a longer time till expiration. Instead of considering the statistics of the underlying to be within a certain range at a fixed point in time now you're OK if it is there at SOME point in time.. If you do get busted there is time for the trade to move back in your favor. If it doesn't.. well you will only really lose the money you already lost. Close the position once you've made 40 - 50 % and sell new options further out; it is my experience that earning the first half of the premium takes considerably less sweat than the second half. Obviously this would mean round trips in commissions. All the more case for SPX vs SPY, at least for my price plan at IB. Buying ten SPY condors costs me $28, the equivalent is 1 SPX contract for $6. |
| sohailmithani 192 posts msg #124389 - Remove message |
7/15/2015 4:50:06 PM Hi Kevin, Have been using Iron Condors in paper trades. Wondering why we look for delta 0.1 or below and not 0.2 or below with expiry say 3-4 weeks instead of 2 weeks. We can book profits at around 50% and sell more IC (closing earlier ones though). Also, did you ever consider Implied Volatility in IC trades. These days IV for more indices is very low so can't have big strike ranges and make less money in premiums too. Need also your thoughts on why QQQ and USO excluded. Both have comparatively higher IV historically (even these days have better IV than SPY, GLD and IWM). Would you recommend some stocks like AAPL to be included. Your thoughts on the above would be helpful. Thanks |
| Eman93 4,750 posts msg #124681 - Remove message |
8/18/2015 10:30:59 PM What i have read about monthly iron condors. Take your daily support and resistance and wait for the stock to hit the mid point and do you trade. Its not about when but where. Suck up a month or 2 of premium. |
| four 5,087 posts msg #132559 - Remove message |
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| four 5,087 posts msg #139419 - Remove message modified |
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