Iron Condor Structure Alternatives

This post will be a quick review of Iron Condor option strategy starting structures.  I will begin with the three starting structures that I have used for backtesting on this blog.  We will then move on to a few other structures, with some discussion on how these structures can be modified and/or combined.  Two other related posts can be found here:

• Thoughts on Options Strategy Backtests
• Delta Neutral Iron Condor

All of the Iron Condor starting structure risk graphs below were created last Wednesday (March 4, 2015) after the market close, when the RUT closed at 1230.73.  In each screenshot the maximum theoretical profit is displayed in red in the lower left-hand side of the risk graph.  Lastly, all of the simulated positions are shown at 71 days to expiration (DTE), with 20 point wide credit spreads with the short calls and puts at approximately 8 delta.


Standard Iron Condor

(click to enlarge)

This is a standard balanced Iron Condor.  This structure works well in a neutral / consolidating market.  Backtests for different delta and DTE variations of this option strategy were shown on this blog between May and September 2014.  Details from the simulated trade above:

• Reg T Margin / Max Risk:  $17,630
• Max Theoretical Profit:       $2,370
• Delta: -19.593
• Theta: 43.964
• Vega: -419.694

Delta Neutral / Unbalanced Iron Condor

(click to enlarge)

This is a delta neutral / unbalanced Iron Condor.  The Iron Condor above had its call spreads reduced from 10 to 5 in order to drop the position deltas from -19 to -1.  This structure works well in a neutral to up-trending market.  Fewer call spreads also means lower theta and a lower position vega.  Backtests for different delta and DTE variations of this option strategy were shown on this blog between September and November 2014.  Details from the simulated trade above:

• Reg T Margin / Max Risk:  $18,265
• Max Theoretical Profit:       $ 1,735
• Delta: -1.570
• Theta: 31.078
• Vega: -274.978

Extra Long Put Iron Condor

(click to enlarge)

This is a standard balanced Iron Condor with an extra long put.  This structure is used to reduce position risk if a market drop occurs.  The extra long put means a lower theta and vega, but a greater delta.  Backtests for different delta and DTE variations of this option strategy were shown on this blog between November and December 2014.  Details from the simulated trade above:

• Reg T Margin / Max Risk:  $18,100
• Max Theoretical Profit:       $1,900
• Delta: -26.151
• Theta: 31.348
• Vega: -349.938

Iron Condor With A "Unit" Put

(click to enlarge)

This is a standard balanced Iron Condor with an extra long put well below the long puts of the put credit spread.  A unit put is in the 1 to 3 delta range and typically costs about $1.  This structure is used to protect against a max loss during an extreme downside market move.  A unit put can be used with any of the Iron Condor structures and has little impact on the ATM delta, theta and vega.  Backtest results for this structure have not been shown on this blog.  Details from the simulated trade above:

• Reg T Margin / Max Risk:  $17,740
• Max Theoretical Profit:       $2,260
• Delta: -20.826
• Theta: 39.913
• Vega: -402.229

Iron Condor With "BatMan Ears" / Embedded Long Strangle

(click to enlarge)

This is a standard balanced Iron Condor with an embedded long strangle.  The long put and call of the strangle inside the Iron Condor create two peaks in the structure that resemble Batman Ears.  This structure is used to control P&L and deltas in order to delay the need for early adjustments.  The extra longs have a significant negative impact on position theta, but a positive impact on position vega.  An embedded strangle can be used with any of the Iron Condor structures, and can be positioned in many different locations inside the Condor.  The longs can also be moved to the point that they overlap, creating a straddle...resulting in a V shape in the Condor, or V-Condor.  Quantities of spreads and strangles have to be adjusted in order to create a profitable starting structure.  Backtest results for this structure have not been shown on this blog.  Details from the simulated trade above:

• Reg T Margin / Max Risk:  $14,920
• Max Theoretical Profit:       $1,080
• Delta: -15.066
• Theta: 16.190
• Vega: -196.379

Iron Condor With Embedded Put Debit Spread

(click to enlarge)

(click to enlarge)

This is a standard balanced Iron Condor with an embedded put debit spread.  This put debit spread controls deltas and vegas in a market down move, which can delay downside adjustments.  A debit spread (put or call) can be added to any of the Iron Condor starting structures either initially or as an adjustment.  Also, the location of the debit spread does not only have to be ATM, but anywhere in the structure.  Backtest results for this structure have not been shown on this blog.  Details from the simulated trade above:

• Reg T Margin / Max Risk:  $17,030
• Max Theoretical Profit:       $2,970 - $1,970
• Delta: -23.587
• Theta: 44.358
• Vega: -417.430

In the next post I will review some ETF Rotation Strategy findings, before returning to the Iron Condor dynamic exit posts.

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