Iron Condor Losing Trades - Summary

In the last six posts, we looked at the start dates for all of the losing "no touch" iron condor (IC) trades in the RUT and SPX during our seven year backtest range.  You can find these six posts at the following links:

• Iron Condor Losing Trades - 24 DTE
• Iron Condor Losing Trades - 31 DTE
• Iron Condor Losing Trades - 38 DTE
• Iron Condor Losing Trades - 52 DTE
• Iron Condor Losing Trades - 66 DTE
• Iron Condor Losing Trades - 80 DTE

In this post we will look at the expiration dates for all of these same losing "no touch" IC trades.  By looking at the expiration dates, we can include all six of the different days-to-expiration (DTE) versions of the "no touch" strategy in a single table.  This will help us see if different DTE for a given expiration date would have resulted in greater/fewer losing trades.

The four tables below represent all of the losing trades for the RUT and SPX "no touch" IC trades in our backtests.  In these tables, I split the trades that were losers on the call side from trades that were losers on the put side. 

In all four tables, each row represents a unique option expiration, with the blue columns associated with the RUT trades and the green columns associated with the SPX trades.  Each of the sub-columns for the RUT and SPX list one of the six DTE windows in our backtests (80, 66, 52, 38, 31, 24).  These sub-columns contain cells that are either blank or contain a number from 1 to 4.  These numbers tell us how many of the four delta variations (8 delta, 12 delta, 16 delta, 20 delta) for a specific DTE window were losers.  

Recall that in most cases in our losing trade analysis, if only one delta variation for a given DTE was a loser, it was typically the 20 delta variation.  If there were two losers, they were typically the 16 and 20 delta variations.  If there were three losers, they were typically the 12, 16, and 20 delta variations.  For example, when you see a 2 in a cell in the tables below, that is most likely telling you that the 16 and 20 delta variations were losers.

Now let's dive into the tables.  The first set of two tables below, looks only at the losing RUT and SPX "no touch" IC trades that lost as a result of a large call side (call credit spread) loss.  The first table covers the expirations from 02/17/2007 through 09/18/2010.  The second table covers the expirations from 10/16/2010 through 04/19/2014.

There are some interesting patterns that are visible in the data.  For example, for the 09/19/2009 expiration, both the RUT and SPX trades lost with most of their delta variations at 80 and 60 DTE, but the other DTE versions of the trades at this expiration were all winners across all delta variations.

For the 07/16/2011 expiration, both the RUT and SPX trades lost with most of their delta variations at 38, 31, and 24 DTE, but the other DTE versions of the trades at this expiration were all winners across all delta variations.  There were also occasions where there was no overlap between the RUT and SPX, but in general, a losing expiration for the RUT corresponded to a losing expiration for the SPX.

The second set of two tables, looks only at the losing RUT and SPX "no touch" IC trades that lost as a result of a large put side (put credit spread) loss.  The first table covers the expirations from 02/17/2007 through 09/18/2010.  The second table covers the expirations from 10/16/2010 through 04/19/2014.

Similar patterns are visible with the put side tables as with the call side tables.  With the very bullish market during the last couple of years, the loss density on the call side is far greater than on the put side.  During this two year period, there were very few IC DTE versions that experienced losses as a result of outsized put spread losses.  It is also interesting to note that with several expirations, it did not matter when you started the trade...the expiration still resulted in losses across a range of  DTE start dates.

The data used to generate these tables is included in the embedded spreadsheet below.  You can browse the data in the embedded spreadsheet or download it from the link below.

You can download this spreadsheet from the blog page at this link: "No Touch" Iron Condor Losing Trades Spreadsheet.

Iron Condor Losing Trades - 24 DTE

In this post, we will look at the losing trades from the backtests for the RUT and SPX "no touch" iron condors (IC) at 24 days to expiration (DTE).  The chart below overlays the start dates of the losing 24 DTE RUT trades with the RUT index.  The start dates of these trades are shown as a bar graph overlay, with the four colors corresponding to a different delta variation of this strategy.  The red bar segment corresponds to the start date of the 20 delta variation, blue with the 16 delta variation, green with the 12 delta variation, and orange with the 8 delta variation.  Recall that the delta number mentioned, is the delta of the short strikes (calls and puts) in the IC.  For all of the "no touch" IC trades, the RUT had a wing width of 20 points while the SPX had a wing width of 25 points.

In the first four prior RUT "no touch" IC versions (80 DTE, 66 DTE, 52 DTE, 38 DTE), the losing 8 delta trades always coincided with losing 12 delta trades, the 12 delta trades with the 16 delta trades, and lastly the losing 16 delta trades coincided with the losing 20 delta trades.  With this 24 DTE trade (and the 31 DTE trade), we see this pattern break down.  There were four trades during this test range where this pattern is violated.

Each row in the table below is analogous to a bar in the chart above.  This table lists the start, end, and expiration dates for the losing trades.  After these three date columns there are four groups of three columns, with each group representing one of the four delta variations of this RUT "no touch" 24 DTE IC (8 delta, 12 delta, 16 delta, 20 delta).  Each of these four groups shows the percent return of the call credit spread (CCS), percent return of the put credit spread (PCS), and the total percent return.  With this information we can see which side of the IC caused a trade to lose, and by how much.

The next chart, similar to the RUT chart above, overlays the start dates of the losing 24 DTE SPX trades with the SPX index.  Just like the last posts, there are several SPX trades that do not follow the same delta pattern of losing trade start dates as the RUT "no touch" IC trades.

Similar to the RUT table above, the table below provides more detail for each of the bars shown in the chart above.  Each row in the table is analogous to a bar in the chart above.  With this information we can see which side of the IC caused a trade to lose, and by how much.

It might be valuable to review the market conditions on the start dates corresponding to these losing trades, as well as the market conditions during the period between the start and end dates.  These conditions might give us a clue as to when and how to adjust these trades.

If you don't want to miss my new blog posts, follow my blog either by email or by RSS feed.  Both options are free, and are available on the top of the right hand navigation column under the headings "Follow By Email" and "Subscribe To RSS Feed".  I follow blogs by RSS using Feedly, but any RSS reader will do.

Iron Condor Losing Trades - 31 DTE

In this post, we will look at the losing trades from the backtests for the RUT and SPX "no touch" iron condors (IC) at 31 days to expiration (DTE).  The chart below overlays the start dates of the losing 31 DTE RUT trades with the RUT index.  The start dates of these trades are shown as a bar graph overlay, with the four colors corresponding to a different delta variation of this strategy.  The red bar segment corresponds to the start date of the 20 delta variation, blue with the 16 delta variation, green with the 12 delta variation, and orange with the 8 delta variation.  Recall that the delta number mentioned, is the delta of the short strikes (calls and puts) in the IC.  For all of the "no touch" IC trades, the RUT had a wing width of 20 points while the SPX had a wing width of 25 points.

In the four prior RUT "no touch" IC versions (80 DTE, 66 DTE, 52 DTE, 38 DTE), the losing 8 delta trades always coincided with losing 12 delta trades, the 12 delta trades with the 16 delta trades, and lastly the losing 16 delta trades coincided with the losing 20 delta trades.  With this 31 DTE trade, we start to see this pattern break down.  There were two trades in the first half of 2010 where this pattern is violated.

Each row in the table below is analogous to a bar in the chart above.  This table lists the start, end, and expiration dates for the losing trades.  After these three date columns there are four groups of three columns, with each group representing one of the four delta variations of this RUT "no touch" 31 DTE IC (8 delta, 12 delta, 16 delta, 20 delta).  Each of these four groups shows the percent return of the call credit spread (CCS), percent return of the put credit spread (PCS), and the total percent return.  With this information we can see which side of the IC caused a trade to lose, and by how much.

The next chart, similar to the RUT chart above, overlays the start dates of the losing 31 DTE SPX trades with the SPX index.  Just like the last posts, there are several SPX trades that do not follow the same delta pattern of losing trade start dates as the RUT "no touch" IC trades.

Similar to the RUT table above, the table below provides more detail for each of the bars shown in the chart above.  Each row in the table is analogous to a bar in the chart above.  With this information we can see which side of the IC caused a trade to lose, and by how much.

It might be valuable to review the market conditions on the start dates corresponding to these losing trades, as well as the market conditions during the period between the start and end dates.  These conditions might give us a clue as to when and how to adjust these trades.

If you don't want to miss my new blog posts, follow my blog either by email or by RSS feed.  Both options are free, and are available on the top of the right hand navigation column under the headings "Follow By Email" and "Subscribe To RSS Feed".  I follow blogs by RSS using Feedly, but any RSS reader will do.

Iron Condor Losing Trades - 38 DTE

In this post, we will look at the losing trades from the backtests for the RUT and SPX "no touch" iron condors (IC) at 38 days to expiration (DTE).  The chart below overlays the start dates of the losing 38 DTE RUT trades with the RUT index.  The start dates of these trades are shown as a bar graph overlay, with the four colors corresponding to a different delta variation of this strategy.  The red bar segment corresponds to the start date of the 20 delta variation, blue with the 16 delta variation, green with the 12 delta variation, and orange with the 8 delta variation.  Recall that the delta number mentioned, is the delta of the short strikes (calls and puts) in the IC.  For all of the "no touch" IC trades, the RUT had a wing width of 20 points while the SPX had a wing width of 25 points.

As with the prior three RUT "no touch" IC versions (80 DTE, 66 DTE, 52 DTE), the losing 8 delta trades always coincided with losing 12 delta trades, the 12 delta trades with the 16 delta trades, and lastly the losing 16 delta trades coincided with the losing 20 delta trades.

Each row in the table below is analogous to a bar in the chart above.  This table lists the start, end, and expiration dates for the losing trades.  After these three date columns there are four groups of three columns, with each group representing one of the four delta variations of this RUT "no touch" 38 DTE IC (8 delta, 12 delta, 16 delta, 20 delta).  Each of these four groups shows the percent return of the call credit spread (CCS), percent return of the put credit spread (PCS), and the total percent return.  With this information we can see which side of the IC caused a trade to lose, and by how much.

The next chart, similar to the RUT chart above, overlays the start dates of the losing 38 DTE SPX trades with the SPX index.  Just like the last posts, there are several SPX trades that do not follow the same delta pattern of losing trade start dates as the RUT "no touch" IC trades.

Similar to the RUT table above, the table below provides more detail for each of the bars shown in the chart above.  Each row in the table is analogous to a bar in the chart above.  With this information we can see which side of the IC caused a trade to lose, and by how much.

It might be valuable to review the market conditions on the start dates corresponding to these losing trades, as well as the market conditions during the period between the start and end dates.  These conditions might give us a clue as to when and how to adjust these trades.

If you don't want to miss my new blog posts, follow my blog either by email or by RSS feed.  Both options are free, and are available on the top of the right hand navigation column under the headings "Follow By Email" and "Subscribe To RSS Feed".  I follow blogs by RSS using Feedly, but any RSS reader will do.

Iron Condor Losing Trades - 52 DTE

In this post, we will look at the losing trades from the backtests for the RUT and SPX "no touch" iron condors (IC) at 52 days to expiration (DTE).  The chart below overlays the start dates of the losing 52 DTE RUT trades with the RUT index.  The start dates of these trades are shown as a bar graph overlay, with the four colors corresponding to a different delta variation of this strategy.  The red bar segment corresponds to the start date of the 20 delta variation, blue with the 16 delta variation, green with the 12 delta variation, and orange with the 8 delta variation.  Recall that the delta number mentioned, is the delta of the short strikes (calls and puts) in the IC.  For all of the "no touch" IC trades, the RUT had a wing width of 20 points while the SPX had a wing width of 25 points.

As with the prior two RUT "no touch" IC versions, the losing 8 delta trades always coincided with losing 12 delta trades, the 12 delta trades with the 16 delta trades, and lastly the losing 16 delta trades coincided with the losing 20 delta trades.

Each row in the table below is analogous to a bar in the chart above.  This table lists the start, end, and expiration dates for the losing trades.  After these three date columns there are four groups of three columns, with each group representing one of the four delta variations of this RUT "no touch" 52 DTE IC (8 delta, 12 delta, 16 delta, 20 delta).  Each of these four groups shows the percent return of the call credit spread (CCS), percent return of the put credit spread (PCS), and the total percent return.  With this information we can see which side of the IC caused a trade to lose, and by how much.

The next chart, similar to the RUT chart above, overlays the start dates of the losing 52 DTE SPX trades with the SPX index.  Just like the last post, in all but two scenarios, the SPX trades follow the same delta pattern of losing trade start dates as the RUT "no touch" IC trades.

Similar to the RUT table above, the table below provides more detail for each of the bars shown in the chart above.  Each row in the table is analogous to a bar in the chart above.  With this information we can see which side of the IC caused a trade to lose, and by how much.

It might be valuable to review the market conditions on the start dates corresponding to these losing trades, as well as the market conditions during the period between the start and end dates.  These conditions might give us a clue as to when and how to adjust these trades.

If you don't want to miss my new blog posts, follow my blog either by email or by RSS feed.  Both options are free, and are available on the top of the right hand navigation column under the headings "Follow By Email" and "Subscribe To RSS Feed".  I follow blogs by RSS using Feedly, but any RSS reader will do.

Iron Condor Losing Trades - 66 DTE

In this post, we will look at the losing trades from the backtests for the RUT and SPX "no touch" iron condors (IC) at 66 days to expiration (DTE).  The chart below overlays the start dates of the losing 66 DTE RUT trades with the RUT index.  The start dates of these trades are shown as a bar graph overlay, with the four colors corresponding to a different delta variation of this strategy.  The red bar segment corresponds to the start date of the 20 delta variation, blue with the 16 delta variation, green with the 12 delta variation, and orange with the 8 delta variation.  Recall that the delta number mentioned, is the delta of the short strikes (calls and puts) in the IC.  For all of the "no touch" IC trades, the RUT had a wing width of 20 points while the SPX had a wing width of 25 points.

As with the RUT 80 DTE "no touch" IC trades, the losing 8 delta trades always coincided with losing 12 delta trades, the 12 delta trades with the 16 delta trades, and lastly the losing 16 delta trades coincided with the losing 20 delta trades.

Each row in the table below is analogous to a bar in the chart above.  This table lists the start, end, and expiration dates for the losing trades.  After these three date columns there are four groups of three columns, with each group representing one of the four delta variations of this RUT "no touch" 66 DTE IC (8 delta, 12 delta, 16 delta, 20 delta).  Each of these four groups shows the percent return of the call credit spread (CCS), percent return of the put credit spread (PCS), and the total percent return.  With this information we can see which side of the IC caused a trade to lose, and by how much.

The next chart, similar to the RUT chart above, overlays the start dates of the losing 66 DTE SPX trades with the SPX index.  The SPX trades, in all but two scenarios, follow the same delta pattern of losing trade start dates as the RUT "no touch" IC trades.

Similar to the RUT table above, the table below provides more detail for each of the bars shown in the chart above.  Each row in the table is analogous to a bar in the chart above.  With this information we can see which side of the IC caused a trade to lose, and by how much.

It might be valuable to review the market conditions on the start dates corresponding to these losing trades, as well as the market conditions during the period between the start and end dates.  These conditions might give us a clue as to when and how to adjust these trades.

If you don't want to miss my new blog posts, follow my blog either by email or by RSS feed.  Both options are free, and are available on the top of the right hand navigation column under the headings "Follow By Email" and "Subscribe To RSS Feed".  I follow blogs by RSS using Feedly, but any RSS reader will do.

Iron Condor Losing Trades - 80 DTE

At this point, we now have baseline "no touch" iron condor (IC) backtest results for the Russell 2000, S&P 500, and Nasdaq 100.  Before we move on to modifications of the basic "no touch" IC strategy, I thought it would be a good idea to look a bit deeper at the losing trades in the backtest results.  Be sure to check the archive section of this blog, if you need more details about the backtests.

In this post, we will look at the losing trades for the RUT and SPX "no touch" ICs at 80 days to expiration (DTE).  The chart below overlays the start dates of the losing 80 DTE RUT trades with the RUT index.  The start dates of these trades are shown as a bar graph overlay, with the four colors corresponding to a different delta variation of this strategy.  The red bar segment corresponds to the start date of the 20 delta variation, blue with the 16 delta variation, green with the 12 delta variation, and orange with the 8 delta variation.  Recall that the delta number mentioned, is the delta of the short strikes (calls and puts) in the IC.  For all of the "no touch" IC trades, the RUT had a wing width of 20 points while the SPX had a wing width of 25 points.

In this chart, it is interesting to note that the losing 8 delta trades always coincided with losing 12 delta trades, the 12 delta trades with the 16 delta trades, and lastly the losing 16 delta trades coincided with the losing 20 delta trades.  With the start dates of the losing trades overlayed on the RUT index, it is pretty easy to guess which side of the IC caused the loss for a given trade.

The table below provides more detail for each of the bars shown in the chart above.  Each row in the table is analogous to a bar in the chart above.  This table lists the start, end, and expiration dates for the losing trades.  After these three date columns there are four groups of three columns, with each group representing one of the four delta variations of this RUT "no touch" 80 DTE IC (8 delta, 12 delta, 16 delta, 20 delta).  Each of these four groups shows the percent return of the call credit spread (CCS), percent return of the put credit spread (PCS), and the total percent return.  With this information we can see which side of the IC caused a trade to lose, and by how much.

The next chart, similar to the RUT chart above, overlays the start dates of the losing 80 DTE SPX trades with the SPX index.  Unlike the RUT trades above, the SPX trades do not follow the same delta pattern for the start dates of the losing trades.  The pattern is loosely followed though.

Similar to the RUT table above, the table below provides more detail for each of the bars shown in the chart above.  Each row in the table is analogous to a bar in the chart above.  With this information we can see which side of the IC caused a trade to lose, and by how much.

With this information, it might be interesting to review the market conditions on the start dates for these losing trades, as well as the market conditions during the period between the start and end dates.  These conditions might give us a clue as to when and how to adjust these trades.

If you don't want to miss my new blog posts, follow my blog either by email or by RSS feed.  Both options are free, and are available on the top of the right hand navigation column under the headings "Follow By Email" and "Subscribe To RSS Feed".  I follow blogs by RSS using Feedly, but any RSS reader will do.

Iron Condor Results Summary - NDX & SPX

We are now finished reviewing the baseline NDX "no touch" Iron Condor (IC) backtest results.  At this point we have enough data to be able to compare the standard/baseline "no touch" IC for the RUT, SPX, and NDX to other variations of this strategy.

In the future we will try to look at the variations in the list below, and compare their results to our baseline results.

• "no touch" + an extra long put
• "no touch" + an extra long call
• "no touch" + an extra long put at various locations between at-the-money (ATM) and the short put
• "no touch" + an extra long call at various locations between ATM and the short call
• "no touch" but with uneven wings so that we start delta neutral
• "no touch" but with uneven wings to position the trade with the market trend
• any of the above variations, but with adjustments based on market indicators
• any of the above variations, but with adjustments based on delta
• any of the above variations, but with adjustments based on P&L
• etc...

When it comes to the adjustment triggers mentioned above (market indicators, delta, P&L, etc), these could be based on our overall IC position, a specific option strike in our position, an option strike of reference (for example the ATM strike at trade initiation).  The adjustments themselves could involve buying long options or debit spreads, or buying back some of our short options or credit spreads, or closing the entire trade.  There are a lot of possibilities with adjustments!

The summary statistics associated with the "no touch" SPX and NDX IC backtests are shown in the embedded Google Docs spreadsheets below.  These spreadsheets will also be available under the "Spreadsheets" section of the navigation bar at the top of the blog, where you can also download them if you choose.

Iron Condor Backtest - NDX - 80 DTE

In this post we will look at the automated backtesting results for four variations of a 80 days-to-expiration (DTE) NDX "no touch" iron condor (IC). The prior NDX "no touch" IC backtest results posts can be found at:

• Iron Condor Backtest - NDX - 24 DTE
• Iron Condor Backtest - NDX - 31 DTE
• Iron Condor Backtest - NDX - 38 DTE
• Iron Condor Backtest - NDX - 52 DTE
• Iron Condor Backtest - NDX - 66 DTE

As with the prior tests on the RUT and SPX, the NDX short strikes for both the call credit spreads and put credit spreads will be at approximately the same delta.  These backtests are "no touch" tests, meaning there are no adjustments during the trades.  In addition, there is not any hedging to start the positions leaning one direction or another.  Many of these settings are available in the backtester, but we will only look at this baseline IC cases initially.  See my post Thoughts on Options Strategy Backtests for additional background on my testing approach.  The setup details for this series of backtests are shown below:

(1) The backtester will start looking for trades that meet the entry DTE requirement after this date
(2) The backtester will not take any trades that will have an exit DTE after this date
(3) Some trading platforms call 80 DTE, 78 DTE (e.g., TOS).  The OSB uses a DTE based on the number of days to the expiration date in the option code/opra code, which is a Saturday for indexes
(4) Some trading platforms call 8 DTE, 6 DTE (e.g., TOS)
(5) Nasdaq 100 Index options
(6) Four 80 DTE "no-touch" iron condors will be tested with their short strikes at varying deltas (8, 12, 16, and 20)
(7) The distance between the short call and long call (also, the distance between the short and long puts).  This number was 20 for the RUT, 25 for the SPX, and is 25 for the NDX due to options availability.

The equity curves for each of the four delta variations are shown in the graph below.  In addition to the equity curves, the ATM IV at trade initiation is also plotted (the average of the ATM call IV and ATM put IV).  Please note that the dates in the chart are expiration dates, not trade initiation or closing dates.  For example, the trade corresponding to the 12/17/2011 expiration was initiated on 09/28/2011 and closed on 12/12/2010.  In all of the charts below, I will show data for trades by their expiration date.

If I look at this same expiration date in the chart below, 12/17/2011, we can see that when the trade was initiated, the ATM IV was 35.  When the trade was closed, the cumulative non-compounded profit had grown to between $16.0k and $60.2k depending on the short delta of the variation of the strategy.

For these trades, the maximum reg-t margin requirement is between $18.0k and $22.4k assuming your brokerage only margins one side of your IC.  If you have portfolio margin, your requirement is somewhere between one-quarter to one-half the reg-t margin numbers.  The 8 delta trade had the highest margin requirement, while the 20 delta trade had the lowest margin requirement.  The margin difference is related to the difference in the size of the credits received.  Higher delta equals larger credit; lower delta equals smaller credit.

In the table below are the standard trade metrics for the four ICs with different short strikes (8 delta, 12 delta, 16 delta, and 20 delta).

As with prior tests, the number of winning trades increases as the size of the short deltas decreases...the further away from ATM, the higher the win rate.  The combination of shorter DTE and closeness of the short strikes makes the higher delta condors have a lower win rate.  Starting with the April, 2013 expiration, all of the delta variations have been losing money.

In the heat maps, we can see the performance by expiration month of each of the individual trades of each of the four delta variations.  The 0% cells represent expiration months were no trade was initiated.  Some of these 0% cells are due to lack of data or bad prints on the trade entry day...leading the backtester to skip that month for testing.  You can see the win rate decreasing as the heat maps move from lower delta to higher delta short strikes...more red cells.

We can also look at the 8 delta strategy in terms of the P&L range (in %), range of the underlying (in %), and IV range (in %), for each trade by expiration date.  This data is shown in the graphs below.  These graphs are showing the open, which is the 0% level, the high (green bar), the low (red bar), and the value at trade close (the blue line).  Also, note that the data in these charts corresponds to expiration dates, but the horizontal axis is not displaying expiration dates in order to make the charts less cluttered with labels.

The top graph displays P&L range for the 8 delta variation of the 80 DTE "no touch" IC.  Even with the short duration of these trades, you can see that when a trade closes profitably the range is mostly on the positive side of the graph.  With losing trades being exactly the opposite.

The middle graph shows the range of the underlying, the NDX, in percent terms during the life of each trade.  The bullish bias of the US markets is evident even in this short duration trade.

The bottom graph shows the ATM IV range and closing value in percent terms, during the life of each IC trade.  IV decays to zero as we approach expiration, so you would expect these bars to be mostly red, with the closing value to be negative (the blue line).  There were several times where ATM IV finished higher, and green...usually when there were market drops.

The next three graphs show the P&L range for the 12 delta, 16 delta, and 20 delta variations of this 80 DTE "no touch" IC strategy.  You can see the increase in P&L volatility as the delta increase from 12 to 20.

If you don't want to miss new blog posts you can follow my blog either by email or RSS.  Both options are free, and are available on the top of the right hand navigation column under the headings "Follow By Email" and "Subscribe To".  BTW, I follow blogs by RSS (using the free Feedly RSS reader).

Iron Condor Backtest - NDX - 66 DTE

In this post we will look at the automated backtesting results for four variations of a 66 days-to-expiration (DTE) NDX "no touch" iron condor (IC).  The backtests results for the NDX "no touch" ICs are worse than than those for the SPX and RUT "no touch" ICs, but I am posting these results for the sake of completeness. The prior NDX "no touch" IC backtest results posts can be found at:

• Iron Condor Backtest - NDX - 24 DTE
• Iron Condor Backtest - NDX - 31 DTE
• Iron Condor Backtest - NDX - 38 DTE
• Iron Condor Backtest - NDX - 52 DTE

As with the prior tests on the RUT and SPX, the NDX short strikes for both the call credit spreads and put credit spreads will be at approximately the same delta.  These backtests are "no touch" tests, meaning there are no adjustments during the trades.  In addition, there is not any hedging to start the positions leaning one direction or another.  Many of these settings are available in the backtester, but we will only look at this baseline IC cases initially.  See my post Thoughts on Options Strategy Backtests for additional background on my testing approach.  The setup details for this series of backtests are shown below:

(1) The backtester will start looking for trades that meet the entry DTE requirement after this date
(2) The backtester will not take any trades that will have an exit DTE after this date
(3) Some trading platforms call 66 DTE, 64 DTE (e.g., TOS).  The OSB uses a DTE based on the number of days to the expiration date in the option code/opra code, which is a Saturday for indexes
(4) Some trading platforms call 8 DTE, 6 DTE (e.g., TOS)
(5) Nasdaq 100 Index options
(6) Four 66 DTE "no-touch" iron condors will be tested with their short strikes at varying deltas (8, 12, 16, and 20)
(7) The distance between the short call and long call (also, the distance between the short and long puts).  This number was 20 for the RUT, 25 for the SPX, and is 25 for the NDX due to options availability.

The equity curves for each of the four delta variations are shown in the graph below.  In addition to the equity curves, the ATM IV at trade initiation is also plotted (the average of the ATM call IV and ATM put IV).  Please note that the dates in the chart are expiration dates, not trade initiation or closing dates.  For example, the trade corresponding to the 03/20/2010 expiration was initiated on 01/13/2010 and closed on 03/12/2010.  In all of the charts below, I will show data for trades by their expiration date.

If I look at this same expiration date in the chart below, 03/20/2010, we can see that when the trade was initiated, the ATM IV was 19.  When the trade was closed, the cumulative non-compounded profit had grown to between $4.7k and $44.4k depending on the short delta of the variation of the strategy.

For these trades, the maximum reg-t margin requirement is between $18.7k and $22.7k assuming your brokerage only margins one side of your IC.  If you have portfolio margin, your requirement is somewhere between one-quarter to one-half the reg-t margin numbers.  The 8 delta trade had the highest margin requirement, while the 20 delta trade had the lowest margin requirement.  The margin difference is related to the difference in the size of the credits received.  Higher delta equals larger credit; lower delta equals smaller credit.

In the table below are the standard trade metrics for the four ICs with different short strikes (8 delta, 12 delta, 16 delta, and 20 delta).

As with prior tests, the number of winning trades increases as the size of the short deltas decreases...the further away from ATM, the higher the win rate.  The combination of shorter DTE and closeness of the short strikes makes the higher delta condors have a lower win rate.  The summary statistics for this 66 DTE trade do not look great.  Starting with the March, 2012 expiration, the 12 and 16 delta trades have been performing well, but the standard deviation of returns prior to this period looks no better than the other delta variations.

In the heat maps, we can see the performance by expiration month of each of the individual trades of each of the four delta variations.  The 0% cells represent expiration months were no trade was initiated.  Some of these 0% cells are due to lack of data or bad prints on the trade entry day...leading the backtester to skip that month for testing.  You can see the win rate decreasing as the heat maps move from lower delta to higher delta short strikes...more red cells.

We can also look at the 8 delta strategy in terms of the P&L range (in %), range of the underlying (in %), and IV range (in %), for each trade by expiration date.  This data is shown in the graphs below.  These graphs are showing the open, which is the 0% level, the high (green bar), the low (red bar), and the value at trade close (the blue line).  Also, note that the data in these charts corresponds to expiration dates, but the horizontal axis is not displaying expiration dates in order to make the charts less cluttered with labels.

The top graph displays P&L range for the 8 delta variation of the 66 DTE "no touch" IC.  Even with the short duration of these trades, you can see that when a trade closes profitably the range is mostly on the positive side of the graph.  With losing trades being exactly the opposite.

The middle graph shows the range of the underlying, the NDX, in percent terms during the life of each trade.  The bullish bias of the US markets is evident even in this short duration trade.

The bottom graph shows the ATM IV range and closing value in percent terms, during the life of each IC trade.  IV decays to zero as we approach expiration, so you would expect these bars to be mostly red, with the closing value to be negative (the blue line).  There were several times where ATM IV finished higher, and green...usually when there were market drops.

The next three graphs show the P&L range for the 12 delta, 16 delta, and 20 delta variations of this 66 DTE "no touch" IC strategy.  You can see the increase in P&L volatility as the delta increase from 12 to 20.

In the next post we will review the 80 DTE "no touch" NDX IC, which will be the last of the NDX baseline IC backtests.

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Iron Condor Backtest - NDX - 52 DTE

In this post we will look at the automated backtesting results for four variations of a 52 days-to-expiration (DTE) NDX "no touch" iron condor (IC).  The backtests results for the NDX "no touch" ICs are worse than than those for the SPX and RUT "no touch" ICs, but I am posting these results for the sake of completeness. The prior NDX "no touch" IC backtest results posts can be found at:

• Iron Condor Backtest - NDX - 24 DTE
• Iron Condor Backtest - NDX - 31 DTE
• Iron Condor Backtest - NDX - 38 DTE

As with the prior tests on the RUT and SPX, the NDX short strikes for both the call credit spreads and put credit spreads will be at approximately the same delta.  These backtests are "no touch" tests, meaning there are no adjustments during the trades.  In addition, there is not any hedging to start the positions leaning one direction or another.  Many of these settings are available in the backtester, but we will only look at this baseline IC cases initially.  See my post Thoughts on Options Strategy Backtests for additional background on my testing approach.  The setup details for this series of backtests are shown below:

(1) The backtester will start looking for trades that meet the entry DTE requirement after this date
(2) The backtester will not take any trades that will have an exit DTE after this date
(3) Some trading platforms call 52 DTE, 50 DTE (e.g., TOS).  The OSB uses a DTE based on the number of days to the expiration date in the option code/opra code, which is a Saturday for indexes
(4) Some trading platforms call 8 DTE, 6 DTE (e.g., TOS)
(5) Nasdaq 100 Index options
(6) Four 52 DTE "no-touch" iron condors will be tested with their short strikes at varying deltas (8, 12, 16, and 20)
(7) The distance between the short call and long call (also, the distance between the short and long puts).  This number was 20 for the RUT, 25 for the SPX, and is 25 for the NDX due to options availability.

The equity curves for each of the four delta variations are shown in the graph below.  In addition to the equity curves, the ATM IV at trade initiation is also plotted (the average of the ATM call IV and ATM put IV).  Please note that the dates in the chart are expiration dates, not trade initiation or closing dates.  For example, the trade corresponding to the 11/19/2011 expiration was initiated on 09/28/2011 and closed on 11/11/2011.  In all of the charts below, I will show data for trades by their expiration date.

If I look at this same expiration date in the chart below, 11/19/2011, we can see that when the trade was initiated, the ATM IV was 36.  When the trade was closed, the cumulative non-compounded profit had grown to between $29.3k and $52.0k depending on the short delta of the variation of the strategy.

For these trades, the maximum reg-t margin requirement is between $18.8k and $22.7k assuming your brokerage only margins one side of your IC.  If you have portfolio margin, your requirement is somewhere between one-quarter to one-half the reg-t margin numbers.  The 8 delta trade had the highest margin requirement, while the 20 delta trade had the lowest margin requirement.  The margin difference is related to the difference in the size of the credits received.  Higher delta equals larger credit; lower delta equals smaller credit.

In the table below are the standard trade metrics for the four ICs with different short strikes (8 delta, 12 delta, 16 delta, and 20 delta).

As with prior tests, the number of winning trades increases as the size of the short deltas decreases...the further away from ATM, the higher the win rate.  The combination of shorter DTE and closeness of the short strikes makes the higher delta condors have a lower win rate.  None of the summary statistics for this 52 DTE trade look great.

In the heat maps, we can see the performance by expiration month of each of the individual trades of each of the four delta variations.  The 0% cells represent expiration months were no trade was initiated.  Some of these 0% cells are due to lack of data or bad prints on the trade entry day...leading the backtester to skip that month for testing.  You can see the win rate decreasing as the heat maps move from lower delta to higher delta short strikes...more red cells.

We can also look at the 8 delta strategy in terms of the P&L range (in %), range of the underlying (in %), and IV range (in %), for each trade by expiration date.  This data is shown in the graphs below.  These graphs are showing the open, which is the 0% level, the high (green bar), the low (red bar), and the value at trade close (the blue line).  Also, note that the data in these charts corresponds to expiration dates, but the horizontal axis is not displaying expiration dates in order to make the charts less cluttered with labels.

The top graph displays P&L range for the 8 delta variation of the 52 DTE "no touch" IC.  Even with the short duration of these trades, you can see that when a trade closes profitably the range is mostly on the positive side of the graph.  With losing trades being exactly the opposite.

The middle graph shows the range of the underlying, the NDX, in percent terms during the life of each trade.  The bullish bias of the US markets is evident even in this short duration trade.

The bottom graph shows the ATM IV range and closing value in percent terms, during the life of each IC trade.  IV decays to zero as we approach expiration, so you would expect these bars to be mostly red, with the closing value to be negative (the blue line).  There were several times where ATM IV finished higher, and green...usually when there were market drops.

The next three graphs show the P&L range for the 12 delta, 16 delta, and 20 delta variations of this 52 DTE "no touch" IC strategy.  You can see the increase in P&L volatility as the delta increase from 12 to 20.

In the next post we will review the 66 DTE "no touch" NDX IC.  Drop me a note if you'd like to see different data presented, and I'll do my best to incorporate your suggestions in upcoming posts.

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