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Monday, June 15, 2015

RUT Iron Condor - High Loss Threshold - 66 DTE

This post looks at a standard (STD) one-lot iron condor on the Russell 2000 Index (RUT), initiated at 66 days-to-expiration (DTE).  The results in this post were derived from approximately 3200 individual trades entered by the backtester.

For background on the setup for the backtests, as well as the nomenclature used in the charts and tables below, please see the introductory article for this series: Iron Condor Series - Higher Loss Thresholds

In the trade metrics tables, I have highlighted some of the rows to indicate values that are in the upper half of the readings.  One of the metrics to note is the average P&L per day in percentage terms (Trade Details (%) - Avg. P&L / Day).  This is a measure of the P&L per day normalized to the maximum margin required for that trade run...it tells us the effectiveness of theta with respect to our margin requirement.

8 Delta Short Strikes
Iron Condor Equity Curves RUT 66 DTE 8 Delta Risk:Reward Exits
(click to enlarge)
Iron Condor Trade Metrics RUT 66 DTE 8 Delta Risk:Reward Exits
(click to enlarge)
For the 66 DTE, 8 delta RUT iron condors, the top exit approaches indicated by the metrics were: 100%:50%, 200%:75%, and 300%:75%.


12 Delta Short Strikes
Iron Condor Equity Curves RUT 66 DTE 12 Delta Risk:Reward Exits
(click to enlarge)
Iron Condor Trade Metrics RUT 66 DTE 12 Delta Risk:Reward Exits
(click to enlarge)
For the 66 DTE, 12 delta RUT iron condors, the top exit approaches indicated by the metrics were: NA%:NA%, 200%:75%, and 300%:75%.


16 Delta Short Strikes
Iron Condor Equity Curves RUT 66 DTE 16 Delta Risk:Reward Exits
(click to enlarge)
Iron Condor Trade Metrics RUT 66 DTE 16 Delta Risk:Reward Exits
(click to enlarge)
The y-axis scale in the equity curve chart above has be increased to accommodate the larger returns for the 16 delta short strike variations.  For the 66 DTE, 16 delta RUT iron condors, the top exit approaches indicated by the metrics were: NA%:NA%, 100%:50%, 200%:75%, and 300%:75%.  Note: that the NA%:50% and 400%:50% variations have nearly identical equity curves in the chart above.


20 Delta Short Strikes
Iron Condor Equity Curves RUT 66 DTE 20 Delta Risk:Reward Exits
(click to enlarge)
Iron Condor Trade Metrics RUT 66 DTE 20 Delta Risk:Reward Exits
(click to enlarge)
The y-axis scale in the equity curve chart above has be increased to accommodate the larger returns for the 20 delta short strike variations.  For the 66 DTE, 20 delta RUT iron condors, the top exit approaches indicated by the metrics were: NA%:NA%, 100%:50%, 200%:75%, and 300%:75%.  Note: that the NA%:50% , 300%:50%, and 400%:50% variations have nearly identical equity curves in the chart above.

With the 66 DTE tests, the highest average P&L per day readings occurred with the 20 delta short strike variations.  In the next post we will look at these same deltas and exits, but on the RUT 80 DTE iron condor.


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6 comments:

albert said...

wow i'm impressed with RUT performance, compared to the best of SPX
i will try IWM for a few trades

SamH said...

Dave - thanks again for your posts. Can you please tell me the max drawdown for the 16 delta NA:NA and 200%:75% scenarios?

Dave R. said...

Hi Albert,

Thanks for your comment. There is definitely a difference between the performance of the RUT and SPX when it comes to iron condors. The number of companies in each index may have something to do with this.

Thanks,
Dave

Dave R. said...

Hi Sam,

I don't provide drawdown numbers, because the denominator of the calculation is more subjective for options strategies than stock strategies.

The denominator could be based on:
1) the actual margin requirements for each trade,
2) the max margin required for the series of trades,
3) the actual portfolio margin required for each trade,
4) the max portfolio margin required for the series of trades
5) the actual starting account size
6) the rolling compounded value of the account size
7) a percentage of the starting account size
...etc

Every trader that I know uses only a percentage of their account when trading options, keeping a large percentage of cash on hand to account for increases in options margin. I personally watch my margin requirement as I initiate trades and try to keep the total initial margin amount at no more than around 40% of my account.

Hope this helps.

Thanks,
Dave

Sam said...

I understand. I guess I can eyeball it from your equity graphs.

Sam said...

I meant to also add thanks for the response :)

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