66 DTE Iron Condor Results Summary

This article reviews the backtest results of iron condors (IC) entered at 66 days to expiration (DTE). These tests covered 9 IC variations, with short strike deltas at four locations (8, 12, 16, 20), utilizing 12 exits.  In all, there were 432 test runs (9 variations x 4 deltas x 12 exits). Each test run executed slightly less than 200 SPX IC trades between the January 2007 expiration and the September 2016 expiration.  A total of 432 ten year backtests.  I used weekly options for this testing, so there were more than 12 trades per year.  In total, there were 80,640 total trades entered for the 66 DTE testing.

You can find the prior SPX IC posts in this series at the links below:

• New Iron Condor Series Introduction
• 38 DTE SPX Iron Condor Results Summary
• 38 DTE SPX Iron Condor Results Summary - Part 2
• 45 DTE SPX Iron Condor Results Summary
• 45 DTE SPX Iron Condor Results Summary - Part 2
• 52 DTE SPX Iron Condor Results Summary
• 59 DTE SPX Iron Condor Results Summary

Normalized P&L per Day

The P&L per day values shown in the charts below are expressed as a percentage of the max risk for that test run...this is necessary in order to fairly compare the returns of each of the different wing widths (25 point, 50 point, 75 point).

The results:

1. We continue to see more variability in P&L per day readings in the 25 point wing ICs, than in the larger wing width ICs
2. Again, similar to the prior test runs, as the delta of the short strikes increases, the variability in the P&L per day readings increases
3. The largest reading was 0.15%, which is smaller than the largest reading for the 38, 45, and 59 DTE ICs.  There was one strategy variation with a 0.15% value:
1. ST (NA:50), 25 point wings, 16 delta (same top strategy as at 59 DTE)
4. The next best readings came in at 0.14% and were associated with three test runs: 
1. ST (NA:50), 25 point wings, 20 delta
2. DN (NA:50), 25 point wings, 12 delta
3. ST (100:50), 25 point wings, 20 delta
5. The top 18 strategy variations had P&L per day readings of 0.12% or greater
1. Of these 18, 17 used the profit taking level of 50%
2. Of these 18, 12 used wing widths of 25 points
3. Of these 18, 13 used the standard balanced (ST) IC structure

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Normalized P&L per Trade

The normalized P&L per trade charts display returns expressed as a percentage of the max risk for a given test run.

The results:

1. The variability in normalized P&L per trade again increases as the delta of the short strike increases, and decreases with increasing wing width.
2. In general, the returns per trade increase with increasing loss taking %, and this trend continues to be more pronounced as the trades move out in time / DTE.
3. The largest normalized P&L per trade was 5.9% and was associated with two strategy variations:
1. ST (NA:50), 25 point wings, 20 delta
2. DN (NA:75), 25 point wings, 20 delta
4. 14 variations had P&L per trade values of 5.0% or greater (fewer than at 59 DTE):
1. 12 of these 14 did not use a loss taking exit (loss taking % = NA)
2. 9 of these 14 were delta neutral (DN) structures (5 were ST structures)
3. 8 of these 14 used a short strike delta of 20
4. 7 of these 14 used a profit taking level of 75% (4 used a profit taking level of 50%)
5. The 66 DTE ICs have the largest average P&L per trade readings:
1. 66 DTE: mean 2.79% / SD 1.09%
2. 59 DTE; mean 2.75% / SD 1.20%
3. 52 DTE: mean 2.33% / SD 0.88%
4. 45 DTE: mean 2.23% / SD 0.87%
5. 38 DTE: mean 1.88% / SD 0.75%

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Win Rate

The win rate trends have been fairly consistent across the DTEs tested so far:

1. In general, win rates tend to increase as wing widths increase
2. Win rates tend to increase as the delta of the short strikes decreases
3. The top win rate was 98%, and was associated with one strategy:
1. DN (NA:50), wing width 75, 8 delta (consistent across DTE)
4. The next best win rate was 97% and was associated with two strategies:
1. ST (NA:50), wing width 75, 8 delta
2. EL (NA:50), wing width 75, 8 delta
5. The top 39 strategies all had win rates of 91% or better. 
1. Of these 39, 28 took profits at 50%
2. Of these 39, 30 did not use loss exits (they exited at 2 DTE; loss taking % = NA)
3. Of these 39, 28 had short strike deltas of 8
4. Wing widths and IC structures varied for these 39
6. The strategies with the top win rates also had some of the largest single losses...and this is consistent across the DTEs tested

(click to enlarge)

Largest Loss

The next charts show the normalized largest loss for each of the test runs  These largest losses are expressed as a percentage of the max risk found in the roughly 200 trades in each test run.

The results:

1. Typically, the largest loss percentage increases with increasing loss taking level
2. There were a number of variations where the largest loss was between 110% and 130% of the max risk.  This particular loss was due to bad data (similar to the worst value in the 59 DTE test runs).
1. In all, there were 48 variations impacted by this bad quote, which was associated with the 17-Sep-2011 expiration.  All of these trades should have exited with a max loss close to 100% somewhere between 8-Aug-2011 and 26-Sep-2011.
2. By 8-Aug-2011, the market was below the long put of the put spread in these trades...the long put was at 1175 for the 25 point wing with strategies.  The market close on 8-Aug-2011 was 1119.46.
3. 65 strategy variations had largest loss readings of 95% or greater
1. Of these 65, 24 had short strike deltas of 20, and another 24 had short strike deltas of 16
2. Of these 65, 53 used wing widths of 25 points
3. All structures (ST, DN, EL) were present in these 65 strategy variations
4. 33 strategy variations had largest losses that were 29% or smaller
1. Of these 33, 17 used wing widths of 75 points
2. Of these 33, 17 used the extra long put (EL) structure
3. Of these 33, 24 had short strike deltas of 8
5. 27 of the top 33 smallest losses used a loss taking level of 100%
6. The top four smallest losses were associated with the following strategies:
1. DN (100:50), 75 point wings, 8 delta -> 11% loss  (win rate 82%)
2. DN (100:75), 75 point wings, 8 delta -> 13% loss  (win rate 72%)
3. DN (100:50), 50 point wings, 8 delta -> 14% loss  (win rate 77%)
4. DN (100:75), 50 point wings, 8 delta -> 14% loss  (win rate 69%)

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Profit Factor

The profit factor results are listed below:

1. Profit factors increase sharply for variations not using a loss taking % (loss taking % = NA)
1. This trend is more pronounced at the lower short strike deltas of 8 and 12
2. 44 strategy variations had profit factors of 2.0 or greater
1. 40 of these 44 did not use a loss taking exit (loss taking % = NA)
2. 27 of these 44 used the delta neutral structure (DN)
3. 26 of these 44 had short strike deltas of 8
3. The top tree performers were:
1. DN (NA:50), 50 point wings, 8 delta -> profit factor of 6.8 (win rate 95%)
2. DN (NA:50), 75 point wings, 8 delta -> profit factor of 4.8 (win rate 98%)
3. DN (NA:NA), 50 point wings, 8 delta -> profit factor of 3.8 (win rate 89%)

(click to enlarge)

Average DIT For Winning Trades

This metric was derived by averaging all of the DIT for all of the winning trades in a test run. Adding a DIT exit to your profit and loss exits is worth considering.

The trends associated with this metric are consistent with the prior DTE test runs:

1. As short strike deltas increase, trade duration increases
2. As profit taking level increases, trade duration increases
3. The 50% profit taking level should have you out of your trade between 21 and 38 days for a 66 DTE IC, depending on short strike delta
4. The smallest winning trade DIT of 21 was associated with 8 delta short strikes, 25 point wings, profit taking at 50%, loss taking at 100%, and the EL structure.  The same configuration but using either the ST or DN structures yielded a an average DIT for winning trades of 22
1. These were the same trade structures that had the smallest winning trade DIT at 52 and 59 DTE

(click to enlarge)

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