RUT Iron Condor Equity Curve Comparison - 66 DTE

In this post we will look at the equity curves for the three versions of the RUT "no touch" Iron Condor (IC) trades at 66 days to expiration (DTE).  The three versions tested were:

• Standard: 10 put credit spreads, and 10 call credit spreads


• Delta Neutral: 10 put credit spreads, and from 5 to 10 call credit spreads - the number is adjusted at trade initiation to create a delta neutral IC.  This structure will reduce losses when up moves occur during the life of the trade.


• Extra Long Put: 10 put credit spreads, 10 call credit spreads, and 1 extra long put.  This structure will reduce losses when down moves occur during the life of the trade.

Like the last post, the equity curves images below are from the original posts where they were first displayed, and have purposely not been updated here.  The first image shows the equity curves for the four delta variations of the Standard IC at 66 DTE.

(click to enlarge)

The next image shows the equity curves for the delta neutral (DN) version of this same trade.  Recall that the DN version of the trade used the same start and end dates as the standard version, as well as the same strike positions.  The only difference between the two trades is that the DN version was initiated with the position deltas close to 0.  This was accomplished by having fewer call credit spreads in the DN version than the Standard version.

(click to enlarge)

When you compare the DN equity curves with the Standard equity curves it is visually apparent that the drawdowns in an up-trending market are lower in the DN version than the Standard version.  This would cover the majority of the time since early 2009.  Also note that this is the same pattern that we noticed in the 80 DTE versions.

The next image shows the equity curves for the Extra Long Put (EL) version of the same trade.  Recall that the EL version of this trade also used the same start and end dates as the standard version as well as the same strike positions.  The only difference between the EL version and the Standard version was one additional long put at the same strike as the long puts in the put credit spreads.

(click to enlarge)

Again, similar to the 80 DTE version, this EL version had significantly lower drawdowns during the market drop in late 2008 through through early 2009.  Its performance since that time is lower than the Standard version though, due to the additional cost of being net long.

In the next post I will start reviewing the automated backtesting of IC versions that are exited based on some threshold.

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 work.