I know it is risky to sell weekly iron condors but I have been trying it for a couple of weeks and so far it has been managable. I am yet to figure out if there is any edge in opening the position on Friday ( before the weekend) versus on Monday ( after the weekend). i am not sure if I see any big advantage of theta decay. I wonder if the premiums on Fridays already take into account the weekend time. Any thoughts?
generally i have noticed some of the decay come out friday for the weekend. usually monday, more comes out. assuming we open at approx. the same place. i don't know what you mean regarding edge on friday vs monday. essentially, if the condor is worth more friday, that's your edge. assuming you are ok with being short it for the weekend.
I just tried a little experiment. I went in to TOS thinkBack and ran some ICs on IWM weeklys starting back in July 2010 (just after the weeklys started trading). I selected ATM and then widened out the wings +/-5, so for example a 60/61/62/63 becomes a 56/61/62/67. I sold 100 per week and the total at the end was 124,500 (not including commissions which would kill you unless you got special pricing). There were only 9 losing weeks out of 35. The biggest loser was -29,150. It would only take a few of those to ruin your results. I am not suggesting anyone trade like this, I don't have the balls to do it. I just thought it was interesting. Also, this was just around the time the Fed started QE2 so the market has been steadily increasing most of the time. (Note - there were a couple of weeks where the call strikes were not available so I just brought them closer.) Weeklys IWM Iron Condors 7/1/10-3/4/11 1100 5000 5000 -15200 13850 13850 -29150 16300 15100 -7900 8100 2600 5050 4850 1650 8500 14100 12650 -10700 2150 14600 9100 800 -6650 11850 11100 11150 -4300 -13700 14500 -3000 -8400 5650 2600 12300 124500
tomk and Elliot thanks thanks for the replies. What I meant by edge was if the premiums on Friday were more than that on Monday. I agree this is a risky game to do it on weeklys but I allot only a small amount for this and do it on stocks with support resistance levels.. and yes QE2 seems to be big help. It is astonishing to see how some of the big stocks with weeklys are pinned almost every week...
I just went back in to try some more back tests and I see that I made a few mistakes on my previous post, like at least one duplicate entry, I think the first one I used the monthly and not the weekly. I guess I was doing it too quickly. Edit: No, maybe the first one was correct.
I'm thinking about weekly calendars. It is interesting to play around with the long side, whether to use a weekly, the front month or even the back month to stabilize the position.
I have been backtesting double diagonals on IWM, first going back to last July when weeklys started, then simulating further back by closing and opening new positions every Friday. Every year has been up since 2003, some up quite a bit, some just enough cover commissions, and some years have been mostly flat or in the red until the end. I am still working on how much protection to buy and when to roll it. I sell first OTM strangles every week and try to buy long quarterly strangles for $3 or less. Amazingly, just the naked shorts are up 20% by themselves, but then I always have to remind myself of Nick Leeson and how he destroyed Baring Bank with naked straddles.
I frequently do weekly calendars on SPY, IWM, and XLE since they have the one point strikes. Lots of flexible ways to trade around these.
Some of my best trades have been near the end of the week. Big commissions for small theta. If the underlying gets close to your option strike, you can close out the position, cut the loss, and call it a day (or even reopen the position in a new spot). But over the weekend, all sorts of unpredictable things can happen. Remember that an IC is best for a sideways market, and after-hours gapping is, well, the opposite of sideways, with no chance to close your position and cut losses. Personally, I wait until Monday morning. And save some for later in the week. You might discover some late bloomers.