Entry Criteria for CTM Iron Condors - Seeking Advice

Discussion in 'Options' started by dbh21, Nov 3, 2012.

  1. dbh21


    Hi, I'm currently investigation close-to-the-money (CTM) iron condors (for instance a delta of 25) instead of my usual OTM condors (delta ~10).

    At any time I can find a trade with a delta of 25, but I am having a very hard time trying to choose when to best enter the trade. I can look for price spikes, minimum premium sizes, distance to bollinger-bands, etc. But these don't seem to improve the odds very much.

    If you were looking at a CTM IC for a delta 25, is there any other entry criteria you would be looking for in order to choose to open today vs another day?

  2. if your trying to get closer to the money.. why not at the money with a near synthetic short straddle with a iron butterfly?
  3. dbh21


    I'll look into that as well, but I would still have questions about timing for opening the trade
  4. your basically forcasting volatility..

    Garch.. Garman Klass.. Parkinson.. variance ratio method to determine trend

    Chapter 6 in Dynamic Hedging (Taleb)... thats where i got my conceptual vision of how MMers forcasted volatility.. if your Marketing markets changing volatility and dealing with it is your job..
  5. dbh21


    This is interesting. I will look into those numbers.
  6. Aside from finding a favorable implied vol to historical vol ratio for options selling, keep an eye on your theta decay - options with a 25 delta decay at a different rate than ATM options.

    You may find that you can put on these trades and close them well before expiration and keep 75%+ of your initial credit without having to deal with the gamma risk of holding positions into the last several weeks. This will free up some margin as well.

    I'm assuming that you are putting your iron condors on as delta neutral as possible while still keeping in mind the proximity of your short strikes to key support and resistance levels for the underlying.