RUT Iron Condor - Dynamic Exit - 66 DTE - 20 Delta

In this post we will look at the backtest results for dynamic exits of the 66 days-to-expiration (DTE) Iron Condor (IC) options strategy, with 20 delta short strikes, with different profit and loss exits.  This is a non-directional options trading strategy that seeks to profit from a market that stays within a range between the two short strikes of the Iron Condor.

For some background on how the results are presented and to read my prior dynamic exit posts, please visit the summary page: Dynamic Exit Iron Condor Articles.

As discussed in the two overview posts on the summary page above, we will look at the same three Iron Condor starting structures that have been backtested on this blog: Standard (STD), Delta Neutral (DN), and Extra Long Put (EL).

Also as discussed in the two overview posts, we will look at three different exits on each of these three starting structures:

• ML40% - this is a Margin Loss % Exit.  Trades using this exit strategy either exit at 8 DTE OR if the trade has a loss greater than 40% of the margin requirement for the trade. (ML40% = Max Loss 40%)
• BSP - this is a Price Movement Exit.  Trades using this exit strategy either exit at 8 DTE OR if the price of the underlying (RUT) moves below the strike of the short put.  (BSP = Below Short Put).
• 0.6:0.6 - This is an Initial Credit % Profit/Loss Exit. Trades using this exit strategy either exit at 8 DTE OR if the trade has a profit of 60% of its initial credit OR if the trade has a loss of 60% of its initial credit.  This can also be thought of as risk:reward; risking 60% to make 60%.

This equity curve chart below is similar to the equity curves in my prior posts, with one exception...the y-axis scale was increased from 1000% to 1400%.   All of the 16 delta and 20 delta equity curve charts contained at least one result set that exceeded the 1000% threshold on the prior charts. In all of the 16 and 20 delta charts, I have colored the y-axis in red, and included a dashed red line at the 1000% level to highlight the fact that the scale is different on these charts.

This equity curve chart below is similar to the equity curves in my prior posts.  In the chart below, all of the STD Iron Condor versions have blue equity curves, all of the DN Iron Condor versions have green equity curves, and all of the EL Iron Condor versions have red equity curves.  The solid lines represent the equity curves for the "no touch" version, while the dashed lines represent the equity curves for the dynamically exited versions.

(click to enlarge)

The three highest overall returns went to the Standard (STD) Iron Condor variations in order:  STD-ML40%, STD without dynamic exits, and STD-0.6:0.6.  The ML40% version closed at either 8 DTE or when the loss calculated on margin exceeded 40%.  The STD-0.6:0.6 version closed at either 8 DTE, a profit of 60% of the initial credit received, or a loss of 60% of the initial credit received.

The details associated with each of the starting structure backtests can be found in the posts below:

• Standard Iron Condor - RUT - 66 DTE
• Delta Neutral Iron Condor - RUT - 66 DTE
• Extra Long Put Iron Condor - RUT - 66 DTE

In the next post I will show the results for the 66 DTE, 20 delta short strike Iron Condor options trading strategy, with varying Initial Credit % Profit/Loss Exits.

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

RUT Iron Condor - Dynamic Exit - 66 DTE - 16 Delta Continued

This post is a continuation of the prior post. In this post we will look at the backtest results for dynamic exits of the 66 days-to-expiration (DTE) Iron Condor (IC), with 16 delta short strikes, with different profit and loss exits as a percentage of the initial credit.  Recall that these RUT ICs were all constructed with 20 point wide credit spreads.  This is a non-directional options trading strategy that seeks to profit from a market that stays within a range between the two short strikes of the Iron Condor.

For some background on how the results are presented and to read my prior dynamic exit posts, please visit the summary page: Dynamic Exit Iron Condor Articles.

As discussed in the two overview posts on the summary page above, we will look at the same three Iron Condor starting structures that have been backtested on this blog: Standard (STD), Delta Neutral (DN), and Extra Long Put (EL).

In this post we will only look at the Initial Credit % Profit/Loss Exit on each of the three starting structures:

• 0.6:0.9 - This is an Initial Credit % Profit/Loss Exit. Trades using this exit strategy either exit at 8 DTE OR if the trade has a profit of 90% of its initial credit OR if the trade has a loss of 60% of its initial credit.  This can also be thought of as risk:reward; risking 60% to make 90%.

This equity curve chart below is similar to the equity curves in my prior posts, with one exception...the y-axis scale was increased from 1000% to 1400%.   All of the 16 delta and 20 delta equity curve charts contained at least one result set that exceeded the 1000% threshold on the prior charts. In all of the 16 and 20 delta charts, I have colored the y-axis in red, and included a dashed red line at the 1000% level to highlight the fact that the scale is different on these charts.

This equity curve chart below is similar to the equity curves in my prior posts.  In the chart below, all of the STD Iron Condor versions have blue equity curves, all of the DN Iron Condor versions have green equity curves, and all of the EL Iron Condor versions have red equity curves.  The solid lines represent the equity curves for the "no touch" version, while the dashed lines represent the equity curves for the dynamically exited versions.

(click to enlarge)

The dynamic exit versions tested were closed at either 8 DTE or a profit of 90% of the initial credit received.  The parameters that varied were the risk or loss amount.  The trades were closed for a loss if the loss was either 60%, 70%, or 80% of the initial credit received.  All four of the Standard Iron Condor options trading strategy (STD) versions outperformed all of the Delta Neutral (DN) and Extra Long Put (EL) versions.  The top performers in terms of overall return, in order were the STD with no dynamic exit, STD-0.8:0.9, and STD-0.7:0.9.  The STD-0.8:0.9 version closed at either 8 DTE, a profit of 90% of the initial credit received, or a loss of 80% of the initial credit received.

The results by year, for each of the 66 DTE, 16 delta short Iron Condor options trading strategy versions are shown in the table below.

(click to enlarge)

The details associated with each of the starting structure backtests can be found in the posts below:

• Standard Iron Condor - RUT - 66 DTE
• Delta Neutral Iron Condor - RUT - 66 DTE
• Extra Long Put Iron Condor - RUT - 66 DTE

In the next post I will show the results for the 66 DTE, 20 delta short strike Iron Condor options trading strategy.

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

RUT Iron Condor - Dynamic Exit - 66 DTE - 16 Delta

In this post we will look at the backtest results for dynamic exits of the 66 days-to-expiration (DTE) Iron Condor (IC) options strategy, with 16 delta short strikes, with different profit and loss exits.  This is a non-directional options trading strategy that seeks to profit from a market that stays within a range between the two short strikes of the Iron Condor.

For some background on how the results are presented and to read my prior dynamic exit posts, please visit the summary page: Dynamic Exit Iron Condor Articles.

As discussed in the two overview posts on the summary page above, we will look at the same three Iron Condor starting structures that have been backtested on this blog: Standard (STD), Delta Neutral (DN), and Extra Long Put (EL).

Also as discussed in the two overview posts, we will look at three different exits on each of these three starting structures:

• ML40% - this is a Margin Loss % Exit.  Trades using this exit strategy either exit at 8 DTE OR if the trade has a loss greater than 40% of the margin requirement for the trade. (ML40% = Max Loss 40%)
• BSP - this is a Price Movement Exit.  Trades using this exit strategy either exit at 8 DTE OR if the price of the underlying (RUT) moves below the strike of the short put.  (BSP = Below Short Put).
• 0.6:0.6 - This is an Initial Credit % Profit/Loss Exit. Trades using this exit strategy either exit at 8 DTE OR if the trade has a profit of 60% of its initial credit OR if the trade has a loss of 60% of its initial credit.  This can also be thought of as risk:reward; risking 60% to make 60%.

This equity curve chart below is similar to the equity curves in my prior posts, with one exception...the y-axis scale was increased from 1000% to 1400%.   All of the 16 delta and 20 delta equity curve charts contained at least one result set that exceeded the 1000% threshold on the prior charts. In all of the 16 and 20 delta charts, I have colored the y-axis in red, and included a dashed red line at the 1000% level to highlight the fact that the scale is different on these charts. 

In the chart below, all of the STD Iron Condor versions have blue equity curves, all of the DN Iron Condor versions have green equity curves, and all of the EL Iron Condor versions have red equity curves.  The solid lines represent the equity curves for the "no touch" version, while the dashed lines represent the equity curves for the dynamically exited versions.

(click to enlarge)

The highest and second highest overall returns went to the Standard (STD) Iron Condor without a dynamic exit, and the STD-ML40%.  The ML40% version closed at either 8 DTE or when the loss calculated on margin exceeded 40%.  Both of these STD versions exceeded the 1000% return level shown in the charts of prior blog posts.

The details associated with each of the starting structure backtests can be found in the posts below:

• Standard Iron Condor - RUT - 66 DTE
• Delta Neutral Iron Condor - RUT - 66 DTE
• Extra Long Put Iron Condor - RUT - 66 DTE

In the next post I will show the results for the 66 DTE, 16 delta short strike Iron Condor options trading strategy, with varying Initial Credit % Profit/Loss Exits.

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

Do Iron Butterflies Need to be Adjusted?

This post will be a quick diversion from the iron condor posts.  You may have noticed on my Twitter feed that I have been running backtests on iron butterflies, straddles, and strangles, using a range of entry and exit criteria.  Today we will take a look at some statistics of a medium term, 43 days to expiration (DTE), iron butterfly on the SPX, to see how different wing widths and exits impact the P&L of this options strategy.

First let's look at the equity curves for some different approaches for picking the wing widths of these 43 DTE SPX iron butterflies.

(click to enlarge)

The chart above shows the equity curves for four different wing widths of iron butterfly (50 point, 75 point, 100 point, and 125 point).  The solid lines are the equity curves for a "no touch" iron butterfly ...these trades are simply entered at 43 DTE and carried to expiration with no adjustments.  The strategies associated with the dashed lines are either carried to expiration OR exited with a profit of 10% of the credit received.  The 10% exit variations perform better than the iron butterflies that are carried to expiration.

(click to enlarge)

The chart above shows the equity curves for the SPX iron butterfly, where the wing widths were set at 5% of the value of the SPX on the day of entry.  I tested a number of different dynamic exits against this strategy, and I've included some in the chart above.  If you've been following my iron condor posts, you will recognize the terminology in the legend of this chart.  Regardless of the exit approach, all variations were unprofitable except for the ML40%:25 dynamic exit...and just barely!  The variations that were carried to expiration performed the worst.

(click to enlarge)

The chart above shows the equity curves for the SPX iron butterfly, where the wing widths were set at the 20 delta strike.  For consistency, the same dynamic exits shown in the 5% wing width chart are shown in the 20 delta wing width chart above.  Some of the dynamic exits combined with the 20 delta strike location performed very well through 2008, but have since been fairly flat.  The 20 delta equity curves look better than those in the prior two charts, but their P&L has either fluctuated wildly or been flat...not very tradeable in this form.

(click to enlarge)

The chart above shows the equity curves for the SPX iron butterfly, where the wing width is set at a fixed size of 100 points.  Again, for consistency, the same dynamic exits are shown in the chart above as in the prior two charts.  Not surprisingly, the variations that were carried to expiration performed the worst.

The equity curve charts show a range of different wing width approaches, from static point based. to dynamic delta and percentage based.  Regardless of the approach for setting the wing width, there is a general trend of dynamic exits improving the P&L relative to the variations carried to expiration...this is one take away.  Another take away, at least for me, is that none of these 32 variations appear tradeable using the rules that were tested.

Next, let's take a look at the trade metrics associated with the four equity curves above.  In the first section of each of the tables below (the first three rows), the total P&L in dollars is shown, as well as the percentage of winning trades and percentage of losing trades.  The second section shows the max risk / margin requirement.  The next two sections show how many trades had the market move to their long put or long call, and the metrics associated with these "touches".

(click to enlarge)

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(click to enlarge)

Here are a couple of points that I noticed from the trade metrics tables above:

1. Trades that were either exited at expiration or exited with a profit of 10% of the credit received, had the highest percentage of winners (73% - 83%)

2. The total dollars lost in a trade where the market touched either the long call or long put, far exceeded the dollars won in trades where this occurred...this is important!  Price reversion did not occur.

For example, lets look at the trade metrics table above, for the 5% wing width iron butterfly. The sixth column of data (43 DTE (5pt-gr) (1/1) (25:25)), shows the metrics for the 5% iron butterfly that is either exited at expiration, OR exited for a loss of 25% of the credit received, OR exited at a profit of 25% of the credit received.  In 19 of these 91 trades, the market touched the long put of the iron butterfly, and in 17 trades the market touched the long call of the iron butterfly.  Of these 19 trades where the market touched the long put, 12 went on to become losers, losing a total of $13,535.  The 7 that became winners only added $7,443.  Of the 17 trades where the market touched the long call, 14 went on to become losers, losing a total of $14,798.  The 3 that became winners only added $4,080.

In nearly all of the 32 strategy variations tested, this pattern plays out...in trades where the market touches either the long call or long put of the iron butterfly, the majority of these trades tend to become losers.  In addition, the total losses associated with these "touch" trades far exceeds the dollars won in these same trades.  If the market moves to your long strike, the market tends to continue it's movement in the same direction.

I think the equity curves and tables above should give you the information needed to answer the question in the title of this blog.  Based on a range of wing widths of iron butterfly, the data seems to suggest that 43 DTE SPX butterflies should be adjusted rather than managed as "no touch" trades.  In addition, the long strike location can be used as one input into your adjustment rules....say add another butter when the market gets within (or beyond) some percentage of the long strike location.

This post took much longer than I anticipated, but hopefully it provides you with some new ideas.  In the next post I will get back to the 66 DTE iron condor options strategy posts, specifically looking at the 16 delta short strike...this strike is interesting!

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

RUT Iron Condor - Dynamic Exit - 66 DTE - 12 Delta Continued

This post is a continuation of the prior post. In this post we will look at the backtest results for dynamic exits of the 66 days-to-expiration (DTE) Iron Condor (IC), with 12 delta short strikes, with different profit and loss exits as a percentage of the initial credit.  Recall that these RUT ICs were all constructed with 20 point wide credit spreads.  This is a non-directional options trading strategy that seeks to profit from a market that stays within a range between the two short strikes of the Iron Condor.

For some background on how the results are presented and to read my prior dynamic exit posts, please visit the summary page: Dynamic Exit Iron Condor Articles.

As discussed in the two overview posts on the summary page above, we will look at the same three Iron Condor starting structures that have been backtested on this blog: Standard (STD), Delta Neutral (DN), and Extra Long Put (EL).

In this post we will only look at the Initial Credit % Profit/Loss Exit on each of the three starting structures:

• 0.6:0.9 - This is an Initial Credit % Profit/Loss Exit. Trades using this exit strategy either exit at 8 DTE OR if the trade has a profit of 90% of its initial credit OR if the trade has a loss of 60% of its initial credit.  This can also be thought of as risk:reward; risking 60% to make 90%.

This equity curve chart below is similar to the equity curves in my prior posts.  In the chart below, all of the STD Iron Condor versions have blue equity curves, all of the DN Iron Condor versions have green equity curves, and all of the EL Iron Condor versions have red equity curves.  The solid lines represent the equity curves for the "no touch" version, while the dashed lines represent the equity curves for the dynamically exited versions.

(click to enlarge)

The dynamic exit versions tested were closed at either 8 DTE or a profit of 90% of the initial credit received.  The parameters that varied were the risk or loss amount.  The trades were closed for a loss if the loss was either 60%, 70%, or 80% of the initial credit received.  All four of the Standard Iron Condor options trading strategy (STD) versions outperformed all of the Delta Neutral (DN) and Extra Long Put (EL) versions.  The top performers in terms of overall return were the STD, followed by a tie between the STD-0.7:0.9 and STD-0.8:0.9.  STD-0.6:0.9 had slightly lower returns than the others.  The STD-0.7:0.9 version closed at either 8 DTE, a profit of 90% of the initial credit received, or a loss of 70% of the initial credit received.

The results by year, for each of the 66 DTE, 12 delta short Iron Condor options trading strategy versions are shown in the table below.  It is obvious from the color coding below that the initial credit based profit and loss exits have smaller swings in their P&L.

(click to enlarge)

The details associated with each of the starting structure backtests can be found in the posts below:

• Standard Iron Condor - RUT - 66 DTE
• Delta Neutral Iron Condor - RUT - 66 DTE
• Extra Long Put Iron Condor - RUT - 66 DTE

In the next post I will show the results for the 66 DTE, 16 delta short strike Iron Condor options trading strategy.

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

RUT Iron Condor - Dynamic Exit - 66 DTE - 12 Delta

In this post we will look at the backtest results for dynamic exits of the 66 days-to-expiration (DTE) Iron Condor (IC) options strategy, with 12 delta short strikes, with different profit and loss exits.  This is a non-directional options trading strategy that seeks to profit from a market that stays within a range between the two short strikes of the Iron Condor.

For some background on how the results are presented and to read my prior dynamic exit posts, please visit the summary page: Dynamic Exit Iron Condor Articles.

As discussed in the two overview posts on the summary page above, we will look at the same three Iron Condor starting structures that have been backtested on this blog: Standard (STD), Delta Neutral (DN), and Extra Long Put (EL).

Also as discussed in the two overview posts, we will look at three different exits on each of these three starting structures:

• ML40% - this is a Margin Loss % Exit.  Trades using this exit strategy either exit at 8 DTE OR if the trade has a loss greater than 40% of the margin requirement for the trade. (ML40% = Max Loss 40%)
• BSP - this is a Price Movement Exit.  Trades using this exit strategy either exit at 8 DTE OR if the price of the underlying (RUT) moves below the strike of the short put.  (BSP = Below Short Put).
• 0.6:0.6 - This is an Initial Credit % Profit/Loss Exit. Trades using this exit strategy either exit at 8 DTE OR if the trade has a profit of 60% of its initial credit OR if the trade has a loss of 60% of its initial credit.  This can also be thought of as risk:reward; risking 60% to make 60%.

This equity curve chart below is similar to the equity curves in my prior posts.  In the chart below, all of the STD Iron Condor versions have blue equity curves, all of the DN Iron Condor versions have green equity curves, and all of the EL Iron Condor versions have red equity curves.  The solid lines represent the equity curves for the "no touch" version, while the dashed lines represent the equity curves for the dynamically exited versions.

(click to enlarge)

The highest and second highest overall returns went to the Standard (STD) Iron Condor with different dynamic exits: STD-ML40% and STD-BSP.  The ML40% version closed at either 8 DTE or when the loss calculated on margin exceeded 40%.  The BSP version closed at either 8 DTE, or when the underlying dropped below the strike of the short put.  The STD version without dynamic exits was in third place..

The details associated with each of the starting structure backtests can be found in the posts below:

• Standard Iron Condor - RUT - 66 DTE
• Delta Neutral Iron Condor - RUT - 66 DTE
• Extra Long Put Iron Condor - RUT - 66 DTE

In the next post I will show the results for the 66 DTE, 12 delta short strike Iron Condor options trading strategy, with varying Initial Credit % Profit/Loss Exits.

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

RUT Iron Condor - Dynamic Exit - 66 DTE - 8 Delta Continued

This post is a continuation of the prior post. In this post we will look at the backtest results for dynamic exits of the 66 days-to-expiration (DTE) Iron Condor (IC), with 8 delta short strikes, with different profit and loss exits as a percentage of the initial credit.  Recall that these RUT ICs were all constructed with 20 point wide credit spreads.  This is a non-directional options trading strategy that seeks to profit from a market that stays within a range between the two short strikes of the Iron Condor.

For some background on how the results are presented and to read my prior dynamic exit posts, please visit the summary page: Dynamic Exit Iron Condor Articles.

As discussed in the two overview posts on the summary page above, we will look at the same three Iron Condor starting structures that have been backtested on this blog: Standard (STD), Delta Neutral (DN), and Extra Long Put (EL).

In this post we will only look at the Initial Credit % Profit/Loss Exit on each of the three starting structures:

• 0.6:0.9 - This is an Initial Credit % Profit/Loss Exit. Trades using this exit strategy either exit at 8 DTE OR if the trade has a profit of 90% of its initial credit OR if the trade has a loss of 60% of its initial credit.  This can also be thought of as risk:reward; risking 60% to make 90%.

This equity curve chart below is similar to the equity curves in my prior posts.  In the chart below, all of the STD Iron Condor versions have blue equity curves, all of the DN Iron Condor versions have green equity curves, and all of the EL Iron Condor versions have red equity curves.  The solid lines represent the equity curves for the "no touch" version, while the dashed lines represent the equity curves for the dynamically exited versions.

(click to enlarge)

The dynamic exit versions tested were closed at either 8 DTE or a profit of 90% of the initial credit received.  The parameters that varied were the risk or loss amount.  The trades were closed for a loss if the loss was either 60%, 70%, or 80% of the initial credit received.  All four of the Standard Iron Condor options trading strategy (STD) versions outperformed all of the Delta Neutral (DN) and Extra Long Put (EL) versions.  The two top performers in terms of overall return were the STD-0.8:0.9 and STD-0.7:0.9 respectively.  STD-0.6:0.9 had a bit lower returns than STD-0.7:0.9.  The STD-0.8:0.9 version closed at either 8 DTE, a profit of 90% of the initial credit received, or a loss of 80% of the initial credit received.

The results by year, for each of the 66 DTE, 8 delta short Iron Condor options trading strategy versions are shown in the table below.

(click to enlarge)

The details associated with each of the starting structure backtests can be found in the posts below:

• Standard Iron Condor - RUT - 66 DTE
• Delta Neutral Iron Condor - RUT - 66 DTE
• Extra Long Put Iron Condor - RUT - 66 DTE

In the next post I will show the results for the 66 DTE, 12 delta short strike Iron Condor options trading strategy.

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

RUT Iron Condor - Dynamic Exit - 66 DTE - 8 Delta

In this post we will look at the backtest results for dynamic exits of the 66 days-to-expiration (DTE) Iron Condor (IC) options strategy, with 8 delta short strikes, with different profit and loss exits.  This is a non-directional options trading strategy that seeks to profit from a market that stays within a range between the two short strikes of the Iron Condor.

For some background on how the results are presented and to read my prior dynamic exit posts, please visit the summary page: Dynamic Exit Iron Condor Articles.

As discussed in the two overview posts on the summary page above, we will look at the same three Iron Condor starting structures that have been backtested on this blog: Standard (STD), Delta Neutral (DN), and Extra Long Put (EL).

Also as discussed in the two overview posts, we will look at three different exits on each of these three starting structures:

• ML40% - this is a Margin Loss % Exit.  Trades using this exit strategy either exit at 8 DTE OR if the trade has a loss greater than 40% of the margin requirement for the trade. (ML40% = Max Loss 40%)
• BSP - this is a Price Movement Exit.  Trades using this exit strategy either exit at 8 DTE OR if the price of the underlying (RUT) moves below the strike of the short put.  (BSP = Below Short Put).
• 0.6:0.6 - This is an Initial Credit % Profit/Loss Exit. Trades using this exit strategy either exit at 8 DTE OR if the trade has a profit of 60% of its initial credit OR if the trade has a loss of 60% of its initial credit.  This can also be thought of as risk:reward; risking 60% to make 60%.

This equity curve chart below is similar to the equity curves in my prior posts.  In the chart below, all of the STD Iron Condor versions have blue equity curves, all of the DN Iron Condor versions have green equity curves, and all of the EL Iron Condor versions have red equity curves.  The solid lines represent the equity curves for the "no touch" version, while the dashed lines represent the equity curves for the dynamically exited versions.

(click to enlarge)

The highest and second highest overall returns went to the Standard (STD) Iron Condor with different dynamic exits: STD-BSP and STD-ML40%.  The BSP version closed at either 8 DTE, or when the underlying dropped below the strike of the short put.  The ML40% version closed at either 8 DTE or when the loss calculated on margin exceeded 40%.  The DN-ML40% was a close third.

The details associated with each of the starting structure backtests can be found in the posts below:

• Standard Iron Condor - RUT - 66 DTE
• Delta Neutral Iron Condor - RUT - 66 DTE
• Extra Long Put Iron Condor - RUT - 66 DTE

In the next post I will show the results for the 66 DTE, 8 delta short strike Iron Condor options trading strategy, with varying Initial Credit % Profit/Loss Exits.

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

Does The Iron Condor Options Strategy Really Work?

This was my question before I started posting backtest results of the Iron Condor options strategy at the beginning of 2014: "does the iron condor options strategy really work".  At that time, I had been trading a hedged, unbalanced, iron condor variation with specific adjustment rules.  We were not experiencing the results that we expected based on all of our manual and automated backtests.  The quantity and magnitude of our wins was nowhere close to what we had seen in all of our testing...we were under performing!

Since the strategy was not working as expected, I thought I would decompose the strategy and look at each of the individual components.  Continuing with this line of thinking, I decided that it would also be valuable to start with a basic Iron Condor, and see how it performed.  As I continued to think about this, it seemed to me that other people might be interested in these results as well...and the idea of posting backtest results was born.

The backtest results on this blog are organized into the following three sections (so far...there is a lot more to come!):

Standard Iron Condor Results
This section covers standard balanced iron condors on the Russell 2000 Index (RUT), S&P 500 Index (SPX), and Nasdaq 100 Index (NDX) at different days to expiration (DTE) and short strike deltas.  In this section we simply put on the iron condor with the specified DTE and short strikes, and take them off at 8 DTE and look at the results.

So, what did these backtest results show?  Personally, my biggest "take away" from these backtests was that all of the RUT and SPX iron condors at various DTE and delta combinations made money.  Some variations had larger drawdowns than others, but sitting on your hands and not making adjustments is a profitable approach over time.

A few other personal "take aways" from these tests were: 

• The RUT 66 DTE variations had the highest overall returns. (see here)
• In general, 2013 was the worst year for iron condors during the test period from 2007 - 2014, with 2008 a close second.
• When the RUT iron condor had a losing trade for a given expiration, the SPX iron condor typically lost for that expiration as well.
• Except for the longest and shortest durations, the SPX iron condors had some of the smother equity curves, although with lower returns than the RUT iron condors.
• The NDX was the worst underlying (of the three) for the "no touch" iron condor, with the biggest equity curve fluctuations.

All 47 of the standard iron condor test results posts are listed here:
No Touch Iron Condor Articles

The introductory article for this section can be found here:
Thoughts on Options Strategy Backtests


Different Starting Structure Results
This section covers different starting structures of iron condors: Standard balanced (STD), Delta Neutral unbalanced (DN), and the standard balanced with an Extra Long Put (EL).  These were tested at different DTE and short strikes.  As with the first section, we enter these iron condors at the specified DTE and short strikes, and take them off at 8 DTE and report the results.  In this section I only tested the different structures on the RUT and SPX.

So, what did the backtest results show? Again, my biggest "take away" was that regardless of starting structure, all of the RUT and SPX "no touch" iron condors made money.  A "no touch" approach with any of these starting structures was profitable over time...no adjustments required!

Some of my other personal "take aways" from this section's tests were:

• The RUT 66 DTE variations had the highest overall returns again. 
• The RUT 8 delta variations nearly always had the lowest return, but typically had the smoothest equity curves.
• In general, the higher the RUT short strike delta, the higher the overall return, but the more jagged the associated equity curve.
• The RUT delta neutral structure at 66 DTE appeared to have the smoothest equity curves of all the RUT variations. (see here)
• The RUT variations handled the 2008 crisis better than the SPX variations, but after that period, the SPX equity curves looked better than the RUT equity curves.
• The SPX 8 and 12 delta short strikes performed significantly better than the 16 and 20 short strikes.

All 29 of the different starting structure test results posts are listed here:
Starting Structure Iron Condor Articles

The introductory articles for this section can be found here:
Delta Neutral Iron Condor
Iron Condor Structure Alternatives


Different Exit Strategy Results
This section covers different types of exits on the three different starting structures: Standard (STD), Delta Neutral (DN), and Extra Long Put (EL).  As with the first section, we enter the iron condors at the specified DTE and short strikes, and take them off at 8 DTE if a dynamic exit was not triggered.  The different types of exits tested included: 1) loss exits based on a percentage of margin, 2) loss exits based on the underlying moving below the short put, 3) profit or loss exits based on a percentage of the credit received.  I only tested the exits on the RUT this time due to the number of backtests required...and this section is still in progress on my blog.

So, what did these backtest results show? At this point, I have only presented the results for the 38 and 52 DTE variations, so I'm still processing the results.  At this time, the trend seems to be that the Standard variation with or without dynamic exits appears to have the greatest overall return.  It will be a few weeks before I can confirm this though.  It is also looking like:

• At 38 DTE, and lower deltas, the margin loss (ML40%) and below short put (BSP) exits improve the performance of the RUT iron condor variations.
• At 52 DTE, and higher deltas, the credit based profit and loss exits improve the performance of the RUT iron condor variations.

All 20 (at this time) of the dynamic exit test results posts are listed here:
Dynamic Exit Iron Condor Articles

The introductory articles for this section can be found here:
RUT Iron Condor - Dynamic Exit Overview - Part 1
RUT Iron Condor - Dynamic Exit Overview - Part 2


With so many new readers coming to this blog, I thought it might be a good time to step back and provide a bit of context for all of these backtests and the reasoning behind my testing approach.  Hopefully I've accomplished this goal with this post.  In addition, I hope this post is a bit of an aid in navigating all of the articles, data, and tests on this blog.  If you are a new reader, please read the introductory articles listed above for each of the three sections.

This blog has taken on more structure and become more extensive than I had originally envisioned.  It has become a repository of test results, that hopefully will aid other options traders in deciding which iron condor flavor will work best with their personality.

In the next post I will move on to the results for the 66 DTE, 8 delta short strike Iron Condor options trading strategy, with varying Initial Credit % Profit/Loss Exits.

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

RUT Iron Condor - Dynamic Exit - 52 DTE Results Summary

Over the last eight posts we reviewed the backtest results for Iron Condors initiated at 52 days to expiration (DTE) on the Russell 2000 Index (RUT).  To be consistent with all of the earlier backtests posted on this blog, we looked at 52 DTE Iron Condors initiated with short strikes at four different locations: 8 delta, 12 delta, 16 delta, and 20 delta. To read the prior dynamic exit posts, please visit the summary page: Dynamic Exit Iron Condor Articles.

For each of these four different short strike deltas, we tested three different starting structures, with six different dynamic exits.  These various combinations, resulted in 21 separate eight year tests for each delta when also including the three baseline (non-exited) tests.  Lastly, each eight year test contained 95 unique trades.

To review, the three Iron Condor starting structures were composed of 20 point wide credit spreads with short strikes at the specified delta mentioned above, and defined as:

• Standard (STD): 10 put credit spreads, and 10 call credit spreads.
• Delta Neutral (DN): 10 put credit spreads, and from 5 to 10 call credit spreads - the number is adjusted at trade initiation to create a delta neutral Iron Condor.
• Extra Long Put (EL): 10 put credit spreads, 10 call credit spreads, and 1 extra long put.

The three categories of dynamic exit tested were:

• ML40% - this is a Margin Loss % Exit.  Trades using this exit strategy either exit at 8 DTE OR if the trade has a loss greater than 40% of the margin requirement for the trade. (ML40% = Max Loss 40%)
• BSP - this is a Price Movement Exit.  Trades using this exit strategy either exit at 8 DTE OR if the price of the underlying (RUT) moves below the strike of the short put.  (BSP = Below Short Put).
• 0.6:0.6 - This is an Initial Credit % Loss/Profit Exit. Trades using this exit strategy either exit at 8 DTE OR if the trade has a loss of 60% of its initial credit OR if the trade has a profit of 60% of its initial credit.  This can also be viewed as a Risk:Reward ratio; risking 60% of the credit to make 60% of the credit.  A 0.7:0.9 variation would mean that the strategy is risking 70% to make 90%...taking a loss at 70% of the initial credit or taking a profit at 90% of the initial credit or exiting at 8 DTE if neither of the prior two criteria were satisfied.

The test results are summarized in the tables below. with one table for each of the four short strike deltas.  The "Strategy Variation" column uses the nomenclature listed above in order to distinguish between the different iron condor variations.

(click to enlarge)

For the 8 delta Iron Condor options strategy variations, the win rates were highest with the non-dynamically exited, the ML40%, and the BSP versions.  You can also see the trend that the Initial Credit %Loss/Profit exits greatly reduced the "worst month" losses, with all of these losses only in the low 20% range.  This reduction in the "worst month" values came at the cost of a reduced the win rate.   The largest annualized monthly returns went to the STD and STD-ML40% variations.

(click to enlarge)

For the 12 delta Iron Condor variations, the lowest Sharpe Ratios by exit occurred with the non-dynamically exited, and ML40% versions.  The highest win rates and worst months went to the non-dynamically exited variations, and the ML40% and BSP variations...the same pattern we noticed in the 8 delta strategies, and in the corresponding 38 DTE strategies.  The largest annualized monthly returns went to the STD-BSP and DN-BSP variations.

(click to enlarge)

With the 16 delta Iron Condor variations, the highest Sharpe Ratio was 0.99 and went to the DN-0.8:0.9 variation.  The 16 delta variations continued the same win rate and worst month pattern that we observed in the 8 and 12 delta variations, although not as pronounced.  The lowest worst month values were, in general, almost double the lowest worst month values for the 8 delta variations.  The largest annualized monthly returns went to the STD-0.6:0.9 variation, with the STD-0.7:0.9 and the STD-0.8:0.9 variations in second and third place respectively.

(click to enlarge)

The 20 delta Iron Condor variations generally have the lowest Sharpe Ratios of the four different short strike delta variations.  The worst month and win rate patterns were still present, although these patterns continued to break down with the 20 delta variations.  The highest Sharpe Ratio was 0.83 and went to the EL-0.6:0.9 and STD-0.8:0.9 variations.  The largest annualized monthly returns went to the STD-0.8:0.9 variation.

Across all of the 52 DTE Iron Condor strategy variations, it is clear that the Risk:Reward exits have a significant positive impact on the "worst month" values.  Although at higher short strike deltas (16 and 20), the ML40% exit had a strong positive effect.  Unlike the 38 DTE variations, 2014 did not have the same broad negative impact on the strategies.  Another observation is that there was not a strong patter to the  average annualized returns as there was with the 38 DTE varations.  If I was forced to trade one of these 52 DTE strategies "as is" with no adjustments, I would pick one of the 8 delta strategies using a risk:reward exit, likely one of the 0.8:0.9 variations...these have summary statistics that are more agreeable to my way of trading.

All of this data, and more, is available to download from the menu bar at the top of the page (SPREADSHEETS -> Dynamic Exit IC Stats), or use the direct link:
http://dtr-trading.blogspot.com/p/dynamic-exit-iron-condor-statistics.html
In this spreadsheet there is a tab for each of the different DTE statistics.  The tabs for 38 DTE and 52 DTE are populated now, and the other DTE tabs will be populated in the future.


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

Other Options Strategies Tweeted on my Twitter Feed

I just recently started Tweeting information that was too short for blog posts.  I've sent many of my options trades (strangles, iron condors, iron butterflies), and also equity curves for some preliminary strategy backtests via Twitter.  During the next few weeks, I will tweet some equity curves and maybe some statistics for strangles, butterflies, and straddles.

Follow me on Twitter @DTRTrading if you want to see this information.  I use Twitter's free TweetDeck app to watch specific people...it's pretty convenient.

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

RUT Iron Condor - Dynamic Exit - 52 DTE - 20 Delta Continued

This post is a continuation of the prior post. In this post we will look at the backtest results for dynamic exits of 52 days-to-expiration (DTE) Iron Condors (IC), with 20 delta short strikes, with different profit and loss exits as a percentage of the initial credit.  Recall that these RUT ICs were all constructed with 20 point wide credit spreads.  This is a non-directional options trading strategy that seeks to profit from a market that stays within in a range between the two short strikes of the Iron Condor.

For some background on how the results are presented and to read my prior dynamic exit posts, please visit the summary page: Dynamic Exit Iron Condor Articles.

As discussed in the two overview posts on the summary page above, we will look at the same three Iron Condor starting structures that have been backtested on this blog: Standard (STD), Delta Neutral (DN), and Extra Long Put (EL).

In this post we will only look at the Initial Credit % Profit/Loss Exit on each of the three starting structures:

• 0.6:0.9 - This is an Initial Credit % Profit/Loss Exit. Trades using this exit strategy either exit at 8 DTE OR if the trade has a profit of 90% of its initial credit OR if the trade has a loss of 60% of its initial credit.  This can also be thought of as risk:reward; risking 60% to make 90%.

This equity curve chart below is similar to the equity curves in my prior posts.  In the chart below, all of the STD Iron Condor versions have blue equity curves, all of the DN Iron Condor versions have green equity curves, and all of the EL Iron Condor versions have red equity curves.  The solid lines represent the equity curves for the "no touch" version, while the dashed lines represent the equity curves for the dynamically exited versions.

(click to enlarge)

The dynamic exit versions tested were closed at either 8 DTE or a profit of 90% of the initial credit received.  The parameters that varied were the risk or loss amount.  The trades were closed for a loss if the loss was either 60%, 70%, or 80% of the initial credit received.  Three of the Standard Iron Condor options trading strategy (STD) versions outperformed all of the Delta Neutral (DN) and Extra Long Put (EL) versions.  The thee top performers, in order, in terms of overall return were the STD-0.8:0.9, STD-0.6:0.9, and STD-0.7:0.9.  STD-0.6:0.9 and STD-0.7:0.9 had fairly similar returns.  The STD-0.9:0.9 version closed at either 8 DTE, a profit of 90% of the initial credit received, or a loss of 80% of the initial credit received.

The results by year, for each of the 52 DTE, 20 delta short Iron Condor options trading strategy versions are shown in the table below.

(click to enlarge)

The details associated with each of the starting structure backtests can be found in the posts below:

• Standard Iron Condor - RUT - 52 DTE
• Delta Neutral Iron Condor - RUT - 52 DTE
• Extra Long Put Iron Condor - RUT - 52 DTE

In the next post I will summarize the dynamic exit results for the 52 DTE Iron Condor options trading strategies and show the associated trade statistics.

Also, if you came to my blog via TheWholeStreet.com, please note that their site has changed to Quantocracy (http://quantocracy.com)

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

RUT Iron Condor - Dynamic Exit - 52 DTE - 20 Delta

In this post we will look at the backtest results for dynamic exits of 52 days-to-expiration (DTE) Iron Condors (IC), with 20 delta short strikes, with different profit and loss exits.  This is a non-directional options trading strategy that seeks to profit from a market that stays within a range between the two short strikes of the Iron Condor.

For some background on how the results are presented and to read my prior dynamic exit posts, please visit the summary page: Dynamic Exit Iron Condor Articles.

As discussed in the two overview posts on the summary page above, we will look at the same three Iron Condor starting structures that have been backtested on this blog: Standard (STD), Delta Neutral (DN), and Extra Long Put (EL).

Also as discussed in the two overview posts, we will look at three different exits on each of these three starting structures:

• ML40% - this is a Margin Loss % Exit.  Trades using this exit strategy either exit at 8 DTE OR if the trade has a loss greater than 40% of the margin requirement for the trade. (ML40% = Max Loss 40%)
• BSP - this is a Price Movement Exit.  Trades using this exit strategy either exit at 8 DTE OR if the price of the underlying (RUT) moves below the strike of the short put.  (BSP = Below Short Put).
• 0.6:0.6 - This is an Initial Credit % Profit/Loss Exit. Trades using this exit strategy either exit at 8 DTE OR if the trade has a profit of 60% of its initial credit OR if the trade has a loss of 60% of its initial credit. This can also be thought of as risk:reward; risking 60% to make 60%.

This equity curve chart below is similar to the equity curves in my prior posts.  In the chart below, all of the STD Iron Condor versions have blue equity curves, all of the DN Iron Condor versions have green equity curves, and all of the EL Iron Condor versions have red equity curves.  The solid lines represent the equity curves for the "no touch" version, while the dashed lines represent the equity curves for the dynamically exited versions.

(click to enlarge)

The three highest overall returns went to versions of the Standard (STD) Iron Condor: STD, STD-ML40% and STD-BSP.  The ML40% version closed at either 8 DTE or when the loss calculated on margin exceeded 40%.  The BSP version closed at either 8 DTE, or when the underlying dropped below the strike of the short put.

The details associated with each of the starting structure backtests can be found in the posts below:

• Standard Iron Condor - RUT - 52 DTE
• Delta Neutral Iron Condor - RUT - 52 DTE
• Extra Long Put Iron Condor - RUT - 52 DTE

In the next post I will show the results for the 52 DTE, 20 delta short strike Iron Condor options trading strategy, with varying Initial Credit % Profit/Loss Exits.

Also, if you came to my blog via TheWholeStreet.com, please note that their site has changed to Quantocracy (http://quantocracy.com)

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

RUT Iron Condor - Dynamic Exit - 52 DTE - 16 Delta Continued

This post is a continuation of the prior post. In this post we will look at the backtest results for dynamic exits of 52 days-to-expiration (DTE) Iron Condors (IC), with 16 delta short strikes, with different profit and loss exits as a percentage of the initial credit.  Recall that these RUT ICs were all constructed with 20 point wide credit spreads.  This is a non-directional options trading strategy that seeks to profit from a market that stays within in a range between the two short strikes of the Iron Condor.

For some background on how the results are presented and to read my prior dynamic exit posts, please visit the summary page: Dynamic Exit Iron Condor Articles.

As discussed in the two overview posts on the summary page above, we will look at the same three Iron Condor starting structures that have been backtested on this blog: Standard (STD), Delta Neutral (DN), and Extra Long Put (EL).

In this post we will only look at the Initial Credit % Profit/Loss Exit on each of the three starting structures:

• 0.6:0.9 - This is an Initial Credit % Profit/Loss Exit. Trades using this exit strategy either exit at 8 DTE OR if the trade has a profit of 90% of its initial credit OR if the trade has a loss of 60% of its initial credit.  This can also be thought of as risk:reward; risking 60% to make 90%.

This equity curve chart below is similar to the equity curves in my prior posts.  In the chart below, all of the STD Iron Condor versions have blue equity curves, all of the DN Iron Condor versions have green equity curves, and all of the EL Iron Condor versions have red equity curves.  The solid lines represent the equity curves for the "no touch" version, while the dashed lines represent the equity curves for the dynamically exited versions.

(click to enlarge)

The dynamic exit versions tested were closed at either 8 DTE or a profit of 90% of the initial credit received.  The parameters that varied were the risk or loss amount.  The trades were closed for a loss if the loss was either 60%, 70%, or 80% of the initial credit received.  Three of the Standard Iron Condor options trading strategy (STD) versions outperformed all of the Delta Neutral (DN) and Extra Long Put (EL) versions.  The two top performers in terms of overall return were the STD-0.6:0.9 and STD-0.7:0.9 respectively.  STD-0.8:0.9 had just slightly lower returns than STD-0.7:0.9.  The STD-0.6:0.9 version closed at either 8 DTE, a profit of 90% of the initial credit received, or a loss of 60% of the initial credit received.

The results by year, for each of the 52 DTE, 16 delta short Iron Condor options trading strategy versions are shown in the table below.

(click to enlarge)

The details associated with each of the starting structure backtests can be found in the posts below:

• Standard Iron Condor - RUT - 52 DTE
• Delta Neutral Iron Condor - RUT - 52 DTE
• Extra Long Put Iron Condor - RUT - 52 DTE

In the next post I will show the results for the 52 DTE, 20 delta short strike Iron Condor options trading strategy.

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