Thursday, May 7, 2015

RUT Iron Condor - Dynamic Exit - 80 DTE - 16 Delta

You may have noticed that I am posting more frequently than in the past.  About three weeks ago, I went from posting every other day to posting five times per week.  Last weekend, after a backtest run involving 26,000 trades, I decided I wanted to push through the last of the dynamic exit articles by this weekend...hence the twice daily postings this week.  I may not finish all of these postings by this weekend, but I will be close.  By mid next week, I will move on to strangle backtests, and some others.

In this post we will look at the backtest results for dynamic exits of the 80 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%.

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.

Iron Condor Dynamic Exit Equity Curves RUT 80 DTE 16 Delta All Versions
(click to enlarge)

The highest and second highest overall returns went to the Standard (STD) Iron Condor with the BSP exit, and the STD without a dynamic exit respectively.  The STD-BSP version closed at either 8 DTE or when the market moved below the short puts of iron condor.  The STD-0.6:0.6 and the DN-BSP variations were tied for third.

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

In the next post I will show the results for the 80 DTE, 16 delta short strike Iron Condor options trading strategy, with varying Initial Credit % Profit/Loss Exits.

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