The Ugly side of Iron Condors

Discussion in 'Options' started by FSU, Jul 2, 2011.

  1. For those who trade Iron Condors or Credit Spreads; how do you choose the legs and the series?
     
    #11     Jul 4, 2011
  2. I trade only the RUT
    I use sigma as first choice (>1.2), then I look at R/R (>8%)
    puts have a higher R/R than calls so I start with the put side
    2 months, 3 months ahead.
    if possible I sell a call spread and accept a lower R/R (5%)
    I close when 80% of the profitpotential has been reached and
    when I see possibilities to sell a spread with expiration later
    or I sell when it gets too close to the short strike.
     
    #12     Jul 5, 2011
  3. jogomax

    jogomax

    Mmm, that sounds familiar to me! :p

    Which period do you consider for the sigma?
     
    #13     Jul 5, 2011
  4. sigma = std.dev = (short strike - index) / ( index * volatility * SQRT(days to exp. / 365))

    I use calendar days (365) although I saw some "guru" use trading days

    RUT aug put 740 has a sigma of -1.62
    (RUT = 840.04 RVX = 21.13)
     
    #14     Jul 5, 2011
  5. jogomax

    jogomax

    Thanks for your time and your sample. It was my mistake.

    I thought that you were talking about selling puts (or calls) when the std.dev of the index was above |1.2| respect to his mean (of "n" days).
     
    #15     Jul 5, 2011
  6. Howard Cohodas
     
    #16     Jul 5, 2011
  7. And your evidence for this is what? And the point of your comment is what?
     
    #17     Jul 6, 2011