Iron Condor Summary Pages - New

I have added three new summary pages to this blog that can be accessed from the horizontal navigation/menu bar above.  The topics covered are:

Starting Structure Iron Condor Articles

• This page lists most of the iron condor (IC) starting structure backtesting posts from this blog.  
• This page can be accessed from the menu above from:
  TRADING PAGES -> Structure IC Articles
• Direct link: http://dtr-trading.blogspot.com/p/starting-structure-iron-condor-articles.html

Dynamic Exit Iron Condor Articles

• This page lists most of the dynamic exit Iron Condor (IC) backtesting posts from this blog.
• This page can be accessed from the menu above from:
  TRADING PAGES -> Dynamic Exit IC Articles
• Direct link: http://dtr-trading.blogspot.com/p/dynamic-exit-iron-condor-articles.html

Dynamic Exit Iron Condor Statistics

• This page contains a downloadable Google Docs spreadsheet listing the summary statistics for the dynamic exit Iron Condors backtested on this blog.  This spreadsheet also contains yearly data for: returns, win rate, and profit factor.  
• This page can be accessed from the menu above from:
  SPREADSHEETS -> Dynamic Exit IC Stats
• Direct link: http://dtr-trading.blogspot.com/p/dynamic-exit-iron-condor-statistics.html
• A screenshot of the spreadsheet is included below:

(click to enlarge)

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

RUT Iron Condor Equity Curve Comparison - 66 DTE

In this post we will look at the equity curves for the three versions of the RUT "no touch" Iron Condor (IC) trades at 66 days to expiration (DTE).  The three versions tested were:

• Standard: 10 put credit spreads, and 10 call credit spreads


• Delta Neutral: 10 put credit spreads, and from 5 to 10 call credit spreads - the number is adjusted at trade initiation to create a delta neutral IC.  This structure will reduce losses when up moves occur during the life of the trade.


• Extra Long Put: 10 put credit spreads, 10 call credit spreads, and 1 extra long put.  This structure will reduce losses when down moves occur during the life of the trade.

Like the last post, the equity curves images below are from the original posts where they were first displayed, and have purposely not been updated here.  The first image shows the equity curves for the four delta variations of the Standard IC at 66 DTE.

(click to enlarge)

The next image shows the equity curves for the delta neutral (DN) version of this same trade.  Recall that the DN version of the trade used the same start and end dates as the standard version, as well as the same strike positions.  The only difference between the two trades is that the DN version was initiated with the position deltas close to 0.  This was accomplished by having fewer call credit spreads in the DN version than the Standard version.

(click to enlarge)

When you compare the DN equity curves with the Standard equity curves it is visually apparent that the drawdowns in an up-trending market are lower in the DN version than the Standard version.  This would cover the majority of the time since early 2009.  Also note that this is the same pattern that we noticed in the 80 DTE versions.

The next image shows the equity curves for the Extra Long Put (EL) version of the same trade.  Recall that the EL version of this trade also used the same start and end dates as the standard version as well as the same strike positions.  The only difference between the EL version and the Standard version was one additional long put at the same strike as the long puts in the put credit spreads.

(click to enlarge)

Again, similar to the 80 DTE version, this EL version had significantly lower drawdowns during the market drop in late 2008 through through early 2009.  Its performance since that time is lower than the Standard version though, due to the additional cost of being net long.

In the next post I will start reviewing the automated backtesting of IC versions that are exited based on some threshold.

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

RUT Iron Condor Equity Curve Comparison - 80 DTE

In this post we will look at the equity curves for the three versions of the RUT "no touch" Iron Condor (IC) trades at 80 days to expiration (DTE).  The three versions tested were:

• Standard: 10 put credit spreads, and 10 call credit spreads


• Delta Neutral: 10 put credit spreads, and from 5 to 10 call credit spreads - the number is adjusted at trade initiation to create a delta neutral IC.  This structure will reduce losses when up moves occur during the life of the trade.


• Extra Long Put: 10 put credit spreads, 10 call credit spreads, and 1 extra long put.  This structure will reduce losses when down moves occur during the life of the trade.

The equity curves images below are from the original posts where they were first displayed, and have purposely not been updated here.  The first image shows the equity curves for the four delta variations of the Standard IC at 80 DTE.

(click to enlarge)

The next image shows the equity curves for the delta neutral (DN) version of this same trade.  Recall that the DN version of the trade used the same start and end dates as the standard version, as well as the same strike positions.  The only difference between the two trades is that the DN version was initiated with the position deltas close to 0.  This was accomplished by having fewer call credit spreads in the DN version than the Standard version.

(click to enlarge)

When you compare the DN equity curves with the Standard equity curves it is visually apparent that the drawdowns in an up-trending market are lower in the DN version than the Standard version.  This would cover the majority of the time since early 2009.

The next image shows the equity curves for the Extra Long Put (EL) version of the same trade.  Recall that the EL version of this trade also used the same start and end dates as the standard version as well as the same strike positions.  The only difference between the EL version and the Standard version was one additional long put at the same strike as the long puts in the put credit spreads.

(click to enlarge)

As we would expect, this EL version had significantly lower drawdowns during the market drop in late 2008 through through early 2009.  Its performance since that time is lower than the Standard version though, due to the additional cost of being net long.

In the next post I will review the equity curves for the three versions of the RUT "no touch" IC trades (standard, delta neutral, and extra long put) at 66 DTE.  After the next post, I will move on to automated backtesting of versions that are exited based on some threshold.

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

SPX Iron Condor Comparisons

In this post we will look at the backtest results (summary statistics) for the three versions of the SPX "no touch" Iron Condor (IC) trades.  The three versions tested were:

• Standard: 10 put credit spreads, and 10 call credit spreads


• Delta Neutral: 10 put credit spreads, and from 5 to 10 call credit spreads - the number is adjusted at trade initiation to create a delta neutral IC.  This structure will reduce losses when up moves occur during the life of the trade.


• Extra Long Put: 10 put credit spreads, 10 call credit spreads, and 1 extra long put.  This structure will reduce losses when down moves occur during the life of the trade.

The non-compounded annual growth rates for the three versions of the SPX "no touch" IC trades are shown in the first table.  The returns for the SPX ICs are highly variable across the three versions.  There are a couple of patterns that stand out though.  The first is that the 20 delta Extra Long Put version has the lowest returns of all of the trades at the 80, 66, and 52 DTE variations.  The second pattern is that the Delta Neutral version has the tightest return range across deltas for a given DTE, than the other two versions...for the 80, 52, and 38 DTE variations.  For example, at 80 DTE the Standard IC return range is 29.2% (51.4% - 22.2%), the Delta Neutral IC return range is 25.5% (54.8% - 29.3%), and the Extra Long Put IC return range is 36.0% (53.6% - 17.6%).  The Delta Neutral version appears to have the most stable returns across DTE and delta variations.

(click to enlarge)

The percent of winning trades for each of the three trade versions is shown in the next table.   The Delta Neutral version has higher win rates for nearly all of the DTE and delta variations. The Standard and Extra Long Put versions have fairly close win rates across most of the DTE and delta variations.

(click to enlarge)

In general the starting structure of each of the three versions does not have a huge impact on win rate...all three versions are fairly similar in terms of win rate.

The best trade for each of the three trade versions is shown in the next table.  As we would expect, the Standard version has the best trade (in terms of percent return) for each DTE / delta combination except for the 52 DTE / 20 delta variation.  The Stanrdard IC version contains more credit spreads than the Delta Neutral version, and does not pay for an extra long as with the Extra Long Put version.

(click to enlarge)

The worst trade for each of the three trade versions is shown in the next table.  In all but the 80 DTE / 16 delta variation, the version with the smallest worst trade is the Extra Long Put version.  This suggests that the the worst trades across the time period tested occurred to the downside...where the extra long put reduced the loss.

(click to enlarge)

Additional summary statistics for all of the trade versions across all DTE and short strike deltas is shown in the table below.

(click to enlarge)

You can get a copy of the above data, as well as all of the other summary statistics for these trades, by downloading the spreadsheet from the following page:
http://dtr-trading.blogspot.com/p/the-summary-statistics-for-no-touch-spx.html

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

• Standard Iron Condor - SPX - 38 DTE
• Standard Iron Condor - SPX - 52 DTE
• Standard Iron Condor - SPX - 66 DTE
• Standard Iron Condor - SPX - 80 DTE

• Delta Neutral Iron Condor - SPX - 38 DTE
• Delta Neutral Iron Condor - SPX - 52 DTE
• Delta Neutral Iron Condor - SPX - 66 DTE
• Delta Neutral Iron Condor - SPX - 80 DTE

• Extra Long Put Iron Condor - SPX - 38 DTE
• Extra Long Put Iron Condor - SPX - 52 DTE
• Extra Long Put Iron Condor - SPX - 66 DTE
• Extra Long Put Iron Condor - SPX - 80 DTE

In the next post I will review the equity curves for the three versions of the RUT "no touch" IC trades (standard, delta neutral, and extra long put) at 80 DTE.

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

RUT Iron Condor Comparisons

In this post we will look at the backtest results (summary statistics) for the three versions of the RUT "no touch" Iron Condor (IC) trades.  The three versions tested were:

• Standard: 10 put credit spreads, and 10 call credit spreads


• Delta Neutral: 10 put credit spreads, and from 5 to 10 call credit spreads - the number is adjusted at trade initiation to create a delta neutral IC.  This structure will reduce losses when up moves occur during the life of the trade.


• Extra Long Put: 10 put credit spreads, 10 call credit spreads, and 1 extra long put.  This structure will reduce losses when down moves occur during the life of the trade.

The non-compounded annual growth rates for the three versions of the RUT "no touch" IC trades are shown in the first table.  The returns are fairly similar at higher days to expiration (DTE) (e.g. 80 DTE), but then start to diverge at lower DTE (e.g. 38 DTE).  The lower DTE strikes have less implied volatility (IV), and the long options in the credit spreads help the overall position less during underlying price movement (delta and gamma).

(click to enlarge)

The percent of winning trades for each of the three trade versions is shown in the next table.   At 80 DTE, the Delta Neutral and Extra Long Put versions have higher win rates.  At 66 DTE, there is not a strong pattern present between the versions and their short strike deltas...the three versions have approximately the same win rate for a given short strike delta.  At 52 DTE, the Standard version has the lowest win rate across deltas.  This pattern reverses at 38 DTE, with the Standard version having the highest win rate across short strike deltas.

(click to enlarge)

The starting structure of each of the three versions does not have a large impact on win rate in general...all three versions are fairly similar in terms of win rate.

The best trade for each of the three trade versions is shown in the next table.  As we would expect, the Standard version always has the best trade (in terms of percent return) for each DTE / delta combination.  This version contains more credit spreads than the Delta Neutral version, and did not pay for an extra long as with the Extra Long Put version.  At higher DTE, the next best is the Delta Neutral version...and this is related to not paying for the extra long that was needed in the Extra Long Put version.

(click to enlarge)

The worst trade for each of the three trade versions is shown in the next table.  In general, the version with the smallest worst trade is the Extra Long Put version.  This suggests that the the worst trades across the time period tested occurred to the downside...where the extra long put reduced the loss.

(click to enlarge)

Additional summary statistics for all of the trade versions across all DTE and short strike deltas is shown in the table below.

(click to enlarge)

You can get a copy of the above data, as well as all of the other summary statistics for these trades, by downloading the spreadsheet from the following page:
http://dtr-trading.blogspot.com/p/backtesting-statistics.html

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

• Standard Iron Condor - RUT - 38 DTE
• Standard Iron Condor - RUT - 52 DTE
• Standard Iron Condor - RUT - 66 DTE
• Standard Iron Condor - RUT - 80 DTE


• Delta Neutral Iron Condor - RUT - 38 DTE
• Delta Neutral Iron Condor - RUT - 52 DTE
• Delta Neutral Iron Condor - RUT - 66 DTE
• Delta Neutral Iron Condor - RUT - 80 DTE


• Extra Long Put Iron Condor - RUT - 38 DTE
• Extra Long Put Iron Condor - RUT - 52 DTE
• Extra Long Put Iron Condor - RUT - 66 DTE
• Extra Long Put Iron Condor - RUT - 80 DTE

In the next post I will compare the summary statistics for the three versions of the SPX "no touch" IC trades (Standard, Delta Neutral, and Extra Long Put).

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

Extra Long Put Iron Condor - Summary Statistics

In this post, we will look at the summary statistics for just the RUT and SPX delta neutral ICs.  The image below shows the summary statistics of the RUT delta neutral IC version for all of the days-to-expiration (DTE) and all of the short strike deltas shown on this blog.  The Sharpe Ratio and Sortino ratios are the best for the 66 DTE, 12, 16 and 20 delta variations.

The next image shows the summary statistics for the SPX delta neutral IC version for all of the DTE, and all of the short strike deltas shown on this blog.  The Sharpe Ratio and Sortino ratios are the best for the 80 DTE, 8 delta variation, and the 52 DTE, 8 and 12 delta variations.

The details associated with the prior two images can be found at the links below:

• Extra Long Put Iron Condor - RUT - 38 DTE
• Extra Long Put Iron Condor - RUT - 52 DTE
• Extra Long Put Iron Condor - RUT - 66 DTE
• Extra Long Put Iron Condor - RUT - 80 DTE

• Extra Long Put Iron Condor - SPX - 38 DTE
• Extra Long Put Iron Condor - SPX - 52 DTE
• Extra Long Put Iron Condor - SPX - 66 DTE
• Extra Long Put Iron Condor - SPX - 80 DTE

In the next post I will compare the summary statistics for the three versions of the RUT "no touch" IC trades (standard, delta neutral, and extra long put).  We will see how the initial structure of the IC impacts the summary statistics.

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

Delta Neutral Iron Condor - Summary Statistics

In the next several posts, I am going to compare the results from the three different "no touch" Iron Condor (IC) trades that I have shown over the last few months.

In this post, we will look at the summary statistics for just the RUT and SPX delta neutral ICs.  The image below shows the summary statistics of the RUT delta neutral IC version for all of the days-to-expiration (DTE) and all of the short strike deltas shown on this blog.  The Sharpe Ratio and Sortino ratios are the best for the 66 DTE, 16 and 20 delta variations.

The next image shows the summary statistics for the SPX delta neutral IC version for all of the DTE, and all of the short strike deltas shown on this blog.  The Sharpe Ratio and Sortino ratios are the best for the 38 DTE, 12 and 16 delta variations.

The details associated with the prior two images can be found at the links below:

• Delta Neutral Iron Condor - RUT - 38 DTE
• Delta Neutral Iron Condor - RUT - 52 DTE
• Delta Neutral Iron Condor - RUT - 66 DTE
• Delta Neutral Iron Condor - RUT - 80 DTE

• Delta Neutral Iron Condor - SPX - 38 DTE
• Delta Neutral Iron Condor - SPX - 52 DTE
• Delta Neutral Iron Condor - SPX - 66 DTE
• Delta Neutral Iron Condor - SPX - 80 DTE

In the next post I will review the summary statistics for the extra long put, "no touch" IC trades.

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

Extra Long Put Iron Condor - SPX - 80 DTE

In this article I will show the automated backtesting results for four variations of a 80 days-to-expiration (DTE) SPX extra-long-put "no touch" Iron Condor (IC).

With the extra-long-put "no touch" IC structure, the call credit spread will be composed of 10 longs and 10 shorts, and the put credit spread component will be composed of 11 longs and 10 shorts...10 credit spreads and an extra long.  See my post Thoughts on Options Strategy Backtests for some background on my testing approach.  The prior SPX extra-long-put "no touch" IC backtest result posts are here:

• Extra Long Put Iron Condor - SPX - 38 DTE
• Extra Long Put Iron Condor - SPX - 52 DTE
• Extra Long Put Iron Condor - SPX - 66 DTE

As with the prior backtests, the short strikes for both the call credit spreads and put credit spreads will be at approximately the same delta.  These backtests will be "no touch" tests, meaning there will be no adjustments during the trades.  The setup details are shown in the table below:

(1) The backtester will start looking for trades that meet the entry DTE requirement after this date
(2) The backtester will not take any trades that will have an exit DTE after this date
(3) Some trading platforms call 80 DTE, 78 DTE (e.g., TOS).  The OSB uses a DTE based on the number of days to the expiration date in the option code/opra code, which is a Saturday for indexes
(4) Some trading platforms call 8 DTE, 6 DTE (e.g., TOS)
(5) S&P 500 Index options
(6) Four 80 DTE extra-long-put "no-touch" iron condors will be tested with their short strikes at varying deltas (8, 12, 16, and 20)
(7) The distance between the short call and long call (also, the distance between the short and long puts).
(8) The call spreads will contain an equal number of long and short options.
(9) The there will be one additional long in the put spreads.

The equity curves for each of the four delta variations are shown in the graph below.  In addition to the equity curves, the ATM IV at trade initiation is also plotted (the average of the ATM call IV and ATM put IV).  Please note that the dates in the chart are expiration dates, not trade initiation or closing dates.  For example, the trade corresponding to the 04/21/2012 expiration was initiated on 02/01/2012 and closed on 04/13/2012.  In all of the charts below, I will show data for trades by their expiration date.

If I look at this same expiration date in the chart below, 04/21/2012, we can see that when the trade was initiated, the ATM IV was 17.  When the trade was closed, the cumulative non-compounded profit had grown to between $36.5k and $83.0k depending on the short delta of the variation of the strategy.

For these trades, the maximum reg-t margin requirement is between $21.0k and $23.8k assuming your brokerage only margins one side of your IC.  If you have portfolio margin, your requirement is somewhere around one-quarter to one-half the reg-t margin numbers.  The margin difference is related to the difference in the size of the credits received.  Higher delta equals larger credit; lower delta equals smaller credit.

In the table below are the standard trade metrics for the four ICs with different short strikes (8 delta, 12 delta, 16 delta, and 20 delta).  The Sharpe and Sortino ratios are again highest for the the 8 delta variation.

Similar to the other "no touch" trades tested, there are some big drawdowns in these trades because of the lack of adjustments.  The extra long put has helped reduce the size of the drawdowns, but only by a small amount. For example, the IC variation without the long put had drawdowns ranging from -63.4% to -93.7%. With the long put, the drawdowns now range from -38.1% to -84.5%.  As we've seen before, the number of winning trades increases as the size of the short deltas decreases..the further away from ATM, the higher the win rate.  The combination of shorter DTE and closeness of the short strikes makes the higher delta condors have a lower win rate.  The non-compounded AGR is greatest with the 8 delta variation.

In the heat maps, we can see the performance by expiration month of each of the individual trades of each of the four delta variations.  The 0% cells represent expiration months were no trade was initiated.  Some of these 0% cells are due to lack of data or bad prints on the trade entry day...leading the backtester to skip that month for testing. In these heat maps for each of the different delta trades, we can see the amount of red (relative size of the negative returns) increasing as the delta of the short strikes is increased...going from the top table to the bottom table in the four tables below.

The next four graphs show the P&L range for the four delta variations of this 80 DTE IC strategy.  These graphs are showing the open, which is the 0% level, the high (green bar), the low (red bar), and the value at trade close (the blue line).  Also, note that the months displayed on the horizontal axis are not displaying expiration dates even though the bars represent the ranges for trades by expiration month...this was done to reduce the number of axis labels on the graphs.

The top graph displays the P&L range for the 8 delta variation of the 80 DTE extra-long-put "no touch" IC.  You can see that when a trade closes profitably the range is mostly on the positive side of the graph.  You can also see the increase in P&L volatility as the delta increase from 8 to 20.

In the next few posts I will summarize the trade metrics and the no touch posts up to this point, in preparation for posting results for IC trades with adjustments.

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

Extra Long Put Iron Condor - SPX - 66 DTE

In this article I will show the automated backtesting results for four variations of a 66 days-to-expiration (DTE) SPX extra-long-put "no touch" Iron Condor (IC).

With the extra-long-put "no touch" IC structure, the call credit spread will be composed of 10 longs and 10 shorts, and the put credit spread component will be composed of 11 longs and 10 shorts...10 credit spreads and an extra long.  See my post Thoughts on Options Strategy Backtests for some background on my testing approach.  The prior SPX extra-long-put "no touch" IC backtest result posts are here:

• Extra Long Put Iron Condor - SPX - 38 DTE
• Extra Long Put Iron Condor - SPX - 52 DTE

As with the prior backtests, the short strikes for both the call credit spreads and put credit spreads will be at approximately the same delta.  These backtests will be "no touch" tests, meaning there will be no adjustments during the trades.  The setup details are shown in the table below:

(1) The backtester will start looking for trades that meet the entry DTE requirement after this date
(2) The backtester will not take any trades that will have an exit DTE after this date
(3) Some trading platforms call 66 DTE, 64 DTE (e.g., TOS).  The OSB uses a DTE based on the number of days to the expiration date in the option code/opra code, which is a Saturday for indexes
(4) Some trading platforms call 8 DTE, 6 DTE (e.g., TOS)
(5) S&P 500 Index options
(6) Four 66 DTE extra-long-put "no-touch" iron condors will be tested with their short strikes at varying deltas (8, 12, 16, and 20)
(7) The distance between the short call and long call (also, the distance between the short and long puts).
(8) The call spreads will contain an equal number of long and short options.
(9) The there will be one additional long in the put spreads.

The equity curves for each of the four delta variations are shown in the graph below.  In addition to the equity curves, the ATM IV at trade initiation is also plotted (the average of the ATM call IV and ATM put IV).  Please note that the dates in the chart are expiration dates, not trade initiation or closing dates.  For example, the trade corresponding to the 03/17/2012 expiration was initiated on 01/11/2012 and closed on 03/09/2012.  In all of the charts below, I will show data for trades by their expiration date.

If we look at this same expiration date in the chart below, 03/17/2012, we can see that when the trade was initiated, the ATM IV was 19.  When the trade was closed, the cumulative non-compounded profit had grown to between $34.0k and $41.8k depending on the short delta of the variation of the strategy.

For these trades, the maximum reg-t margin requirement is between $21.1k and $24.2k assuming your brokerage only margins one side of your IC.  If you have portfolio margin, your requirement is somewhere around one-quarter to one-half the reg-t margin numbers.  The margin difference is related to the difference in the size of the credits received.  Higher delta equals larger credit; lower delta equals smaller credit.

In the table below are the standard trade metrics for the four ICs with different short strikes (8 delta, 12 delta, 16 delta, and 20 delta).  The Sharpe and Sortino ratios are the highest for the the 8 delta variation.

Similar to the other "no touch" trades tested, there are some big drawdowns in these trades because of the lack of adjustments.  The extra long put has helped reduce the size of the drawdowns a small amount though.  For example, the IC variation without the long put had drawdowns ranging from -84.1% to -92.4%. With the long put, the drawdowns now range from -75.6% to -85.8%...this structure is an improvement...but not a large improvment.  As we've seen before, the number of winning trades increases as the size of the short deltas decreases..the further away from ATM, the higher the win rate.  The combination of shorter DTE and closeness of the short strikes makes the higher delta condors have a lower win rate.  The non-compounded AGR is about the same for the 8, 12, and 16 delta variations.

In the heat maps, we can see the performance by expiration month of each of the individual trades of each of the four delta variations.  The 0% cells represent expiration months were no trade was initiated.  Some of these 0% cells are due to lack of data or bad prints on the trade entry day...leading the backtester to skip that month for testing. In these heat maps for each of the different delta trades, we can see the amount of red (relative size of the negative returns) increasing as the delta of the short strikes is increased...going from the top table to the bottom table in the four tables below.

The next four graphs show the P&L range for the four delta variations of this 66 DTE IC strategy.  These graphs are showing the open, which is the 0% level, the high (green bar), the low (red bar), and the value at trade close (the blue line).  Also, note that the months displayed on the horizontal axis are not displaying expiration dates even though the bars represent the ranges for trades by expiration month...this was done to reduce the number of axis labels on the graphs.

The top graph displays the P&L range for the 8 delta variation of the 66 DTE extra-long-put "no touch" IC.  You can see that when a trade closes profitably the range is mostly on the positive side of the graph.  You can also see the increase in P&L volatility as the delta increase from 8 to 20.

In the next post I will move on to the 80 DTE extra-long-put "no touch" SPX IC.

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

Extra Long Put Iron Condor - SPX - 52 DTE

In this article I will show the automated backtesting results for four variations of a 52 days-to-expiration (DTE) SPX extra-long-put "no touch" Iron Condor (IC).  I am back in the States for two weeks and will try to catch up on a few things, including a bit more blogging...

With the extra-long-put "no touch" IC structure, the call credit spread will be composed of 10 longs and 10 shorts, and the put credit spread component will be composed of 11 longs and 10 shorts...10 credit spreads and an extra long.  See my post Thoughts on Options Strategy Backtests for some background on my testing approach.  The prior SPX extra-long-put "no touch" IC backtest result post is here:

• Extra Long Put Iron Condor - SPX - 38 DTE

As with the prior backtests, the short strikes for both the call credit spreads and put credit spreads will be at approximately the same delta.  These backtests will be "no touch" tests, meaning there will be no adjustments during the trades.  The setup details are shown in the table below:

(1) The backtester will start looking for trades that meet the entry DTE requirement after this date
(2) The backtester will not take any trades that will have an exit DTE after this date
(3) Some trading platforms call 52 DTE, 50 DTE (e.g., TOS).  The OSB uses a DTE based on the number of days to the expiration date in the option code/opra code, which is a Saturday for indexes
(4) Some trading platforms call 8 DTE, 6 DTE (e.g., TOS)
(5) S&P 500 Index options
(6) Four 52 DTE extra-long-put "no-touch" iron condors will be tested with their short strikes at varying deltas (8, 12, 16, and 20)
(7) The distance between the short call and long call (also, the distance between the short and long puts).
(8) The call spreads will contain an equal number of long and short options.
(9) The there will be one additional long in the put spreads.

The equity curves for each of the four delta variations are shown in the graph below.  In addition to the equity curves, the ATM IV at trade initiation is also plotted (the average of the ATM call IV and ATM put IV).  Please note that the dates in the chart are expiration dates, not trade initiation or closing dates.  For example, the trade corresponding to the 03/17/2012 expiration was initiated on 01/25/2012 and closed on 03/09/2012.  In all of the charts below, I will show data for trades by their expiration date.

If I look at this same expiration date in the chart below, 03/17/2012, we can see that when the trade was initiated, the ATM IV was 16.  When the trade was closed, the cumulative non-compounded profit had grown to between $47.5k and $65.8k depending on the short delta of the variation of the strategy.

For these trades, the maximum reg-t margin requirement is between $22.6k and $28.2k assuming your brokerage only margins one side of your IC.  If you have portfolio margin, your requirement is somewhere around one-quarter to one-half the reg-t margin numbers.  The 8 delta trade would have had the highest margin requirement, except for the fact that the 20 delta variation had one bad trade entry which made its max margin $28.2k.  Without this outlier the margin range would have been between $22.3k and $24.1k.  The margin difference is related to the difference in the size of the credits received.  Higher delta equals larger credit; lower delta equals smaller credit.

In the table below are the standard trade metrics for the four ICs with different short strikes (8 delta, 12 delta, 16 delta, and 20 delta).  The Sharpe and Sortino ratios are the highest for the the 8 delta variation.

Similar to the other "no touch" trades tested, there are some big drawdowns in these trades because of the lack of adjustments.  The extra long put has helped reduce the size of the drawdowns though. For example, the IC variation without the long put had drawdowns ranging from -65.2% to -91.9%. With the long put, the drawdowns now range from -46.2% to -61.9%.  As we've seen before, the number of winning trades increases as the size of the short deltas decreases..the further away from ATM, the higher the win rate.  The combination of shorter DTE and closeness of the short strikes makes the higher delta condors have a lower win rate.  The non-compounded AGR is greatest with the 8 and 12 delta variations.

In the heat maps, we can see the performance by expiration month of each of the individual trades of each of the four delta variations.  The 0% cells represent expiration months were no trade was initiated.  Some of these 0% cells are due to lack of data or bad prints on the trade entry day...leading the backtester to skip that month for testing. In these heat maps for each of the different delta trades, we can see the amount of red (relative size of the negative returns) increasing as the delta of the short strikes is increased...going from the top table to the bottom table in the four tables below.

The next four graphs show the P&L range for the four delta variations of this 52 DTE IC strategy.  These graphs are showing the open, which is the 0% level, the high (green bar), the low (red bar), and the value at trade close (the blue line).  Also, note that the months displayed on the horizontal axis are not displaying expiration dates even though the bars represent the ranges for trades by expiration month...this was done to reduce the number of axis labels on the graphs.

The top graph displays the P&L range for the 8 delta variation of the 52 DTE extra-long-put "no touch" IC.  You can see that when a trade closes profitably the range is mostly on the positive side of the graph.  You can also see the increase in P&L volatility as the delta increase from 8 to 20.

In the next post I will move on to the 66 DTE extra-long-put "no touch" SPX IC.

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

Extra Long Put Iron Condor - SPX - 38 DTE

In this article I will show the automated backtesting results for four variations of a 38 days-to-expiration (DTE) SPX extra-long-put "no touch" Iron Condor (IC).  I am still in Brasilia, Brazil and feel I have a minor triumph today by completing a mid-week post while still swamped with client work! Now on to the strategy results....

With the extra-long-put "no touch" IC structure, the call credit spread will be composed of 10 longs and 10 shorts, and the put credit spread component will be composed of 11 longs and 10 shorts...10 put credit spreads and an extra put long.  See my post Thoughts on Options Strategy Backtests for some background on my testing approach.

As with the prior backtests, the short strikes for both the call credit spreads and put credit spreads will be at approximately the same delta.  These backtests will be "no touch" tests, meaning there will be no adjustments during the trades.  The setup details are shown in the table below:

(1) The backtester will start looking for trades that meet the entry DTE requirement after this date
(2) The backtester will not take any trades that will have an exit DTE after this date
(3) Some trading platforms call 38 DTE, 36 DTE (e.g., TOS).  The OSB uses a DTE based on the number of days to the expiration date in the option code/opra code, which is a Saturday for indexes
(4) Some trading platforms call 8 DTE, 6 DTE (e.g., TOS)
(5) S&P 500 Index options
(6) Four 38 DTE extra-long-put "no-touch" iron condors will be tested with their short strikes at varying deltas (8, 12, 16, and 20)
(7) The distance between the short call and long call (also, the distance between the short and long puts).
(8) The call spreads will contain an equal number of long and short options.
(9) The there will be one additional long in the put spreads.

The equity curves for each of the four delta variations are shown in the graph below.  In addition to the equity curves, the ATM IV at trade initiation is also plotted (the average of the ATM call IV and ATM put IV).  Please note that the dates in the chart are expiration dates, not trade initiation or closing dates.  For example, the trade corresponding to the 02/18/2012 expiration was initiated on 01/11/2012 and closed on 02/10/2012.  In all of the charts below, I will show data for trades by their expiration date.

If I look at this same expiration date in the chart below, 02/18/2012, we can see that when the trade was initiated, the ATM IV was 18.  When the trade was closed, the cumulative non-compounded profit had grown to between $38.1k and $53.2k depending on the short delta of the variation of the strategy.

For these trades, the maximum reg-t margin requirement is between $22.3k and $24.1k assuming your brokerage only margins one side of your IC.  If you have portfolio margin, your requirement is somewhere around one-quarter to one-half the reg-t margin numbers.  The 8 delta trade had the highest margin requirement, while the 20 delta trade had the lowest margin requirement.  The margin difference is related to the difference in the size of the credits received.  Higher delta equals larger credit; lower delta equals smaller credit.

In the table below are the standard trade metrics for the four ICs with different short strikes (8 delta, 12 delta, 16 delta, and 20 delta).  The Sharpe and Sortino ratios are the highest for the the 12 delta variation, followed next by the 16 delta variation.

Similar to the other "no touch" trades tested, there are some big drawdowns in these trades because of the lack of adjustments.  The extra long put has helped reduce the size of the drawdowns though.  For example, the IC variation without the long put had drawdowns ranging from -78.8% to -93.3%.  With the long put, the drawdowns now range from -56.1% to -75.9%.  As we've seen before, the number of winning trades increases as the size of the short deltas decreases..the further away from ATM, the higher the win rate.  The combination of shorter DTE and closeness of the short strikes makes the higher delta condors have a lower win rate.  The non-compounded AGR is greatest with the 16 and 12 delta variations.

In the heat maps, we can see the performance by expiration month of each of the individual trades of each of the four delta variations.  The 0% cells represent expiration months were no trade was initiated.  Some of these 0% cells are due to lack of data or bad prints on the trade entry day...leading the backtester to skip that month for testing. In these heat maps for each of the different delta trades, we can see the amount of red (relative size of the negative returns) increasing as the delta of the short strikes is increased...going from the top table to the bottom table in the four tables below.

The next four graphs show the P&L range for the four delta variations of this 38 DTE IC strategy.  These graphs are showing the open, which is the 0% level, the high (green bar), the low (red bar), and the value at trade close (the blue line).  Also, note that the months displayed on the horizontal axis are not displaying expiration dates even though the bars represent the ranges for trades by expiration month...this was done to reduce the number of axis labels on the graphs.

The top graph displays the P&L range for the 8 delta variation of the 38 DTE extra-long-put "no touch" IC.  You can see that when a trade closes profitably the range is mostly on the positive side of the graph.  You can also see the increase in P&L volatility as the delta increase from 8 to 20.

In the next post I will move on to the 52 DTE extra-long-put "no touch" SPX IC.

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

Extra Long Put Iron Condor - RUT - 80 DTE

In this article I will show the automated backtesting results for four variations of an 80 days-to-expiration (DTE) RUT extra-long-put "no touch" IC.  I am writing this post in Brasilia, Brazil today (rather than the States).  I was hoping to write twice a week during this trip, but I've barely been able to write once each week...so much for best laid plans!  Now on to the strategy results....

With the extra-long-put "no touch" IC structure, the call credit spread will be composed of 10 longs and 10 shorts, and the put credit spread component will be composed of 11 longs and 10 shorts...10 put credit spreads and an extra long put.  See my post Thoughts on Options Strategy Backtests for some background on my testing approach.  The prior RUT extra-long-put "no touch" IC backtest result post is here:

• Extra Long Put Iron Condor - RUT - 38 DTE
• Extra Long Put Iron Condor - RUT - 52 DTE
• Extra Long Put Iron Condor - RUT - 66 DTE

As with the prior backtests, the short strikes for both the call credit spreads and put credit spreads will be at approximately the same delta.  These backtests will be "no touch" tests, meaning there will be no adjustments during the trades.  The setup details are shown in the table below:

(1) The backtester will start looking for trades that meet the entry DTE requirement after this date
(2) The backtester will not take any trades that will have an exit DTE after this date
(3) Some trading platforms call 80 DTE, 78 DTE (e.g., TOS).  The OSB uses a DTE based on the number of days to the expiration date in the option code/opra code, which is a Saturday for indexes
(4) Some trading platforms call 8 DTE, 6 DTE (e.g., TOS)
(5) Russell 2000 Index options
(6) Four 80 DTE extra-long-put "no-touch" iron condors will be tested with their short strikes at varying deltas (8, 12, 16, and 20)
(7) The distance between the short call and long call (also, the distance between the short and long puts).
(8) The call spreads will contain an equal number of long and short options.
(9) The there will be one additional long in the put spreads.

The equity curves for each of the four delta variations are shown in the graph below.  In addition to the equity curves, the ATM IV at trade initiation is also plotted (the average of the ATM call IV and ATM put IV).  Please note that the dates in the chart are expiration dates, not trade initiation or closing dates.  For example, the trade corresponding to the 02/18/2012 expiration was initiated on 11/30/2011 and closed on 02/10/2012.  In all of the charts below, I will show data for trades by their expiration date.

If I look at this same expiration date in the chart below, 02/18/2012, we can see that when the trade was initiated, the ATM IV was 35.  When the trade was closed, the cumulative non-compounded profit had grown to between $51.1k and $66.1k depending on the short delta of the variation of the strategy.

For these trades, the maximum reg-t margin requirement is between $15.3k and $18.3k assuming your brokerage only margins one side of your IC.  If you have portfolio margin, your requirement is somewhere around one-quarter to one-half the reg-t margin numbers.  The 8 delta trade had the highest margin requirement, while the 20 delta trade had the lowest margin requirement.  The margin difference is related to the difference in the size of the credits received.  Higher delta equals larger credit; lower delta equals smaller credit.

In the table below are the standard trade metrics for the four ICs with different short strikes (8 delta, 12 delta, 16 delta, and 20 delta).  The Sharpe and Sortino ratios are the highest for the the 8 delta variation, which is the same pattern we noticed with the 66 DTE version.

Similar to the other "no touch" trades tested, there are some big drawdowns in these trades because of the lack of adjustments.  The extra long has helped with the drawdowns in the 8, 12, and 16 delta variations.  As we've seen before, the number of winning trades increases as the size of the short deltas decreases..the further away from ATM, the higher the win rate.  The combination of shorter DTE and closeness of the short strikes makes the higher delta condors have a lower win rate.  The non-compounded AGR is greatest with the 16 delta variation.

In the heat maps, we can see the performance by expiration month of each of the individual trades of each of the four delta variations.  The 0% cells represent expiration months were no trade was initiated.  Some of these 0% cells are due to lack of data or bad prints on the trade entry day...leading the backtester to skip that month for testing. In these heat maps for each of the different delta trades, we can see the amount of red (relative size of the negative returns) increasing as the delta of the short strikes is increased.

The next four graphs show the P&L range for the four delta variations of this 80 DTE IC strategy.  These graphs are showing the open, which is the 0% level, the high (green bar), the low (red bar), and the value at trade close (the blue line).  Also, note that the months displayed on the horizontal axis are not displaying expiration dates even though the bars represent the ranges for trades by expiration month...this was done to reduce the number of axis labels on the graphs.

The top graph displays the P&L range for the 8 delta variation of the 80 DTE extra-long-put "no touch" IC.  You can see that when a trade closes profitably the range is mostly on the positive side of the graph.  You can also see the increase in P&L volatility as the delta increase from 8 to 20.

In the next post I will move on to the 38 DTE extra-long-put "no touch" SPX IC.

On a side note, my friend Jared at QuantConnect just let me know that they are planning to open source their platform.  Read the blog post on their open source plans at:
http://www.quantconnect.com/blog/open-source-algorithmic-trading-platform/


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

Extra Long Put Iron Condor - RUT - 66 DTE

In this article we will look at the automated backtesting results for four variations of a 66 days-to-expiration (DTE) RUT extra-long-put "no touch" IC.  With this structure, the call credit spread will be composed of 10 longs and 10 shorts, and the put credit spread component will be composed of 11 longs and 10 shorts...10 credit spreads and an extra long.  See my post Thoughts on Options Strategy Backtests for some background on my testing approach.  The prior RUT extra-long-put "no touch" IC backtest results posts are here:

• Extra Long Put Iron Condor - RUT - 38 DTE
• Extra Long Put Iron Condor - RUT - 52 DTE

As with the prior backtests, the short strikes for both the call credit spreads and put credit spreads will be at approximately the same delta.  These backtests will be "no touch" tests, meaning there will be no adjustments during the trades.  The setup details are shown in the table below:

(1) The backtester will start looking for trades that meet the entry DTE requirement after this date
(2) The backtester will not take any trades that will have an exit DTE after this date
(3) Some trading platforms call 66 DTE, 64 DTE (e.g., TOS).  The OSB uses a DTE based on the number of days to the expiration date in the option code/opra code, which is a Saturday for indexes
(4) Some trading platforms call 8 DTE, 6 DTE (e.g., TOS)
(5) Russell 2000 Index options
(6) Four 66 DTE extra-long-put "no-touch" iron condors will be tested with their short strikes at varying deltas (8, 12, 16, and 20)
(7) The distance between the short call and long call (also, the distance between the short and long puts).
(8) The call spreads will contain an equal number of long and short options.
(9) The there will be one additional long in the put spreads.

The equity curves for each of the four delta variations are shown in the graph below.  In addition to the equity curves, the ATM IV at trade initiation is also plotted (the average of the ATM call IV and ATM put IV).  Please note that the dates in the chart are expiration dates, not trade initiation or closing dates.  For example, the trade corresponding to the 03/17/2012 expiration was initiated on 01/11/2012 and closed on 03/09/2012.  In all of the charts below, I will show data for trades by their expiration date.

If I look at this same expiration date in the chart below, 03/17/2012, we can see that when the trade was initiated, the ATM IV was 27.  When the trade was closed, the cumulative non-compounded profit had grown to between $43.1k and $88.1k depending on the short delta of the variation of the strategy.

For these trades, the maximum reg-t margin requirement is between $15.7k and $18.6k assuming your brokerage only margins one side of your IC.  If you have portfolio margin, your requirement is somewhere around one-quarter to one-half the reg-t margin numbers.  The 8 delta trade had the highest margin requirement, while the 20 delta trade had the lowest margin requirement.  The margin difference is related to the difference in the size of the credits received.  Higher delta equals larger credit; lower delta equals smaller credit.

In the table below are the standard trade metrics for the four ICs with different short strikes (8 delta, 12 delta, 16 delta, and 20 delta).  The Sharpe and Sortino ratios are the highest for the the 16 delta variation.

Similar to the other "no touch" trades tested, there are some big drawdowns in these trades because of the lack of adjustments.  The extra long has helped with the drawdowns, but this DTE version is worse than the prior two versions.  As we've seen before, the number of winning trades increases as the size of the short deltas decreases..the further away from ATM, the higher the win rate.  The combination of shorter DTE and closeness of the short strikes makes the higher delta condors have a lower win rate.  The non-compounded AGR is greatest with the 20 delta variation...the variation with the worst drawdown and lowest win rate.

In the heat maps, we can see the performance by expiration month of each of the individual trades of each of the four delta variations.  The 0% cells represent expiration months were no trade was initiated.  Some of these 0% cells are due to lack of data or bad prints on the trade entry day...leading the backtester to skip that month for testing. In these heat maps for each of the different delta trades, we can see the amount of red (relative size of the negative returns) increasing as the delta of the short strikes is increased.

The next four graphs show the P&L range for the four delta variations of this 66 DTE IC strategy.  These graphs are showing the open, which is the 0% level, the high (green bar), the low (red bar), and the value at trade close (the blue line).  Also, note that the months displayed on the horizontal axis are not displaying expiration dates even though the bars represent the ranges for trades by expiration month...this was done to reduce the number of axis labels on the graphs.

The top graph displays the P&L range for the 8 delta variation of the 66 DTE extra-long-put "no touch" IC.  You can see that when a trade closes profitably the range is mostly on the positive side of the graph.  You can also see the increase in P&L volatility as the delta increase from 8 to 20.

In the next post I will move on to the 80 DTE extra-long-put "no touch" RUT IC.

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