59 DTE Iron Condor Results Summary

This article reviews the backtest results of iron condors (IC) entered at 59 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 approximately 200 SPX IC trades between the January 2007 expiration and the September 2016 expiration.  I used weekly options for this testing, so there were more than 12 trades per year.  In total, there were 84,996 total trades entered for the 59 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

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 0.18%, which is the same as the largest reading for the 38 and 45 DTE ICs.  There was one strategy variation with a 0.18% value:
1. ST (NA:50), 25 point wings, 16 delta
4. The next best readings came in at 0.16% and 0.15% and were associated with five test runs: 
1. EL (NA:50), 25 point wings, 16 delta  (0.16%)
2. DN (NA:50), 50 point wings, 16 delta  (0.15%)
3. ST (NA:50), 25 point wings, 20 delta  (0.15%)
4. DN (NA:50), 50 point wings, 16 delta  (0.15%)
5. ST (300:50), 25 point wings, 16 delta  (0.15%)
5. 20 of the top 22 readings were associated with a profit taking level of 50%
1. Of these 20 readings, 14 had short delta strikes of 16

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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 is significantly more pronounced than at 52 DTE.
3. The largest normalized P&L per trade was 6.0% for two strategy variations:
1. ST (NA:75), 25 point wings, 16 delta
2. ST (NA:50), 25 point wings, 16 delta
4. 22 variations had P&L per trade values of 5.0% or greater
1. 21 of these 22 did not use a loss taking exit (loss taking % = NA)
2. 14 of these 22 used a short strike delta of 16
3. 12 of these 22 were delta neutral (DN) structures (9 were ST structures)
4. 12 of these 22 used a profit taking exit of 75% (6 used a profit taking % = NA)
5. Wing widths for these 22 spanned all of the possible test values
5. The 59 DTE ICs have the largest P&L per trade readings, and largest standard deviations:
1. 59 DTE; mean 2.75% / SD 1.20%
2. 52 DTE: mean 2.33% / SD 0.88%
3. 45 DTE: mean 2.23% / SD 0.87%
4. 38 DTE: mean 1.88% / SD 0.75%

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Win Rate

The win rate trends appear 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 96%, and was associated with three strategies:
1. DN (NA:50), wing width 75, 8 delta
2. ST (NA:50), wing width 75, 8 delta
3. EL (NA:50), wing width 75, 8 delta
4. The top 41 strategies all had win rates of 91% or better. 
1. Of these 41, 28 took profits at 50%
2. Of these 41, 35 did not use loss exits (they exited at 2 DTE; loss taking % = NA)
3. Of these 41, 26 had short strike deltas of 8
4. Wing widths and IC structures varied for these 41
5. The strategies with the top win rates also had some of the largest single losses...and this is consistent across the DTEs tested
6. The win rates for the 59 DTE ICs were slightly better than the win rates for the 52 DTE ICs

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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 over 200% of the max risk.  This particular loss was due to bad data, rather than an actual loss of that size.
1. In all, there were 27 variations impacted by this bad quote, which was associated with the 14-Nov-2014 expiration.  All of these trades should have exited with a max loss close to 100% somewhere between 10-Oct-2014 and 15-Oct-2014.
2. By 15-Oct-2014, the market was below the long put of the put spread in these trades...the long put was at 1875 for the 25 point wing strategies.  The market low on 15-Oct-2014 was 1820, with a close at 1862.
3. 72 strategy variations had largest loss readings of 95% or greater
1. 58 had short strike deltas of 20, while the other 14 had short strike deltas of 16
2. All wing widths, and structures (ST, DN, EL) were present in these 72 strategy variations
4. 27 of the top 28 smallest losses used a loss taking level of 100
5. 15 of the top 17 smallest losses had short strike deltas of 8
6. The top 3 smallest losses were:
1. DN (100:50), 75 point wings, 8 delta -> 14% loss  (win rate 82%)
2. EL (100:50), 50 point wings, 8 delta -> 17% loss  (win rate 80%)
3. EL (100:75), 50 point wings, 8 delta ->17% loss  (win rate 74%)

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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)
2. 62 strategy variations had profit factors of 2.0 or greater (double the number at 52 DTE!)
1. 55 of these 62 did not use a loss taking exit (loss taking % = NA)
2. 32 of these 62 used the delta neutral structure (DN)
3. 31 of these 62 had short strike deltas of 8
3. The top tree performers were:
1. DN (NA:NA), 75 point wings, 8 delta -> profit factor of 3.5 (win rate 92%)
2. DN (NA:NA), 50 point wings, 8 delta -> profit factor of 3.5 (win rate 90%)
3. DN (NA:75), 50 point wings, 8 delta -> profit factor of 3.4 (win rate 92%)
4. These top performers had largest losses of approximately -90% due to not implementing loss taking exits

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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 19 and 34 days for a 59 DTE IC, depending on short strike delta
4. The smallest winning trade DIT of 19 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 21
1. These were the same trade structures that had the smallest winning trade DIT at 52 DTE

(click to enlarge)

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52 DTE Iron Condor Results Summary

This article looks at the backtest results of iron condors (IC) entered at 52 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 more than 200 SPX IC trades between the Jan-2007 expiration and the Sep-2016 expiration.  I used weekly options for this testing, so there were more than 12 trades per year.  In total, there were 94,752 total trades entered for the 52 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

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. Similar to the 38 and 45 DTE ICs, there is 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 0.13%, which is lower than the largest reading of 0.18% for the 38 and 45 DTE ICs.  There were three strategy variations with a 0.13% value:
1. ST (NA:75), 25 point wings, 8 delta
2. ST (100:75), 25 point wings, 8 delta
3. DN (NA:50), 25 point wings, 16 delta
4. The next best reading was 0.12% and was associated with seven test runs: 
1. DN (NA:50), 25 point wings, 8 delta
2. DN (NA:50), 50 point wings, 20 delta
3. ST (100:50), 25 point wings, 8 delta
4. DN (NA:50), 25 point wings, 20 delta
5. DN (NA:50), 25 point wings, 12 delta
6. DN (NA:75), 25 point wings, 8 delta
7. ST (300:50), 25 point wings, 16 delta
5. 22 of the top 30 readings were associated with a profit taking level of 50%
1. Of these 22 readings, 13 had 25 point wing widths

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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...this is a recurring pattern in the results
2. The largest normalized P&L per trade was 4.7% for the DN (NA:NA), 25 point wings, 12 delta short strikes
3. In general, the returns per trade increase with increasing loss taking %, and is more pronounced at 52 DTE than at 45 DTE.
4. 17 variations had P&L per trade values of 4.0% or greater
1. 11 of these 17 were delta neutral (DN) structures
2. 16 of these 17 did not use a loss taking exit (loss taking % = NA)
3.  8 of these 17 used a profit taking exit of 75%, while the other 9 did not use a profit taking exit (profit taking % = NA)
4. Wing widths and short strike deltas for these 17 spanned all of the possible test values
5. The 52 DTE ICs have larger P&L per trade readings than the 38 DTE ICs
1. 2.33% / SD 0.88% VS avg 1.88% / SD 0.75%
6. The 52 DTE ICs have slightly larger P&L per trade readings than the 45 DTE ICs
1. 2.33% / SD 0.88% VS avg 2.23% / sd 0.87%

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Win Rate

The win rate trends appear 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 96%, and was associated with these strategies:
1. DN (NA:50), wing width 75, 8 delta
2. ST (NA:50), wing width 75, 8 delta
4. The top 29 strategies all had win rates of 91% or better. 
1. Of these 29, 16 took profits at 50%
2. Of these 29, 28 did not use loss exits (they exited at 2 DTE; loss taking % = NA)
3. Of these 29, 23 had short strike deltas of 8
4. Of these 29, wing widths and IC structures varied
5. The strategies with the top win rates also had some of the largest single losses...as you'd expect for strategies not using loss exits...and this is consistent across the DTEs tested
6. The win rates for the 52 DTE ICs were slightly better than the win rates for the 45 DTE ICs

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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 for all of the 200+ trades in each test run.

The results:

1. The largest loss percentage increases with increasing loss taking level
2. 39 strategy variations had largest loss readings of 95% or greater
1. 36 carried trades to 2 DTE and did not use loss taking levels (loss taking % = NA)
2. 3 used a loss taking level of 300%
3. All wing widths, short strike deltas, and structures (ST, DN, EL) were present in these 39 strategy variations
4. The worst 18 had wing widths of 25 points
3. The top 28 smallest losses all used a loss taking level of 100
4. The top 12 smallest losses had short strike deltas of 8
5. The top 6 smallest losses had wing widths of 75 points 
6. The top 3 smallest losses were:
1. DN (100:50), 75 point wings, 8 delta -> 13% loss
2. EL (100:50), 75 point wings, 8 delta -> 14% loss
3. ST (100:50), 75 point wings, 8 delta ->14% loss

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Profit Factor

The profit factor results are listed below:

1. 31 strategy variations had profit factors of 2.0 or greater
1. 29 of these 31 did not use a loss taking exit (loss taking % = NA)
2. 19 of these 31 used the delta neutral structure (DN)
3. 22 of these 31 had short strike deltas of 8
2. The top five performers were:
1. DN (NA:NA), 25 point wings, 8 delta -> profit factor of 2.9 (win rate 90%)
2. DN (NA:NA), 75 point wings, 8 delta -> profit factor of 2.9 (win rate 92%)
3. DN (NA:75), 25 point wings, 8 delta -> profit factor of 2.8 (win rate 92%)
4. DN (NA:NA), 50 point wings, 8 delta -> profit factor of 2.7 (win rate 91%)
5. DN (NA:50), 25 point wings, 8 delta -> profit factor of 2.7 (win rate 95%)
3. These top performers also had some of the largest single losses due to not implementing loss taking exits

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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 17 and 29 days for a 52 DTE IC
4. The smallest winning trade DIT of 17 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 18

(click to enlarge)

The results from using monthly trade initiation is similar to the results from weekly trade initiation.  I will not publish a part 2 for the 52 DTE IC tests since the difference in results between these two data sets is minimal.


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45 DTE Iron Condor Results Summary - Part 2

In the last post, 45 DTE Iron Condor Results Summary, I showed the backtest results from 96,624 iron condor (IC) trades.  All of those test results were based on weekly expiration data at 45 days to expiration (DTE).  In this post, we'll look at a few key metrics and how those metrics differ between weekly data and monthly data.

The charts below are organized similar to those in the prior post. Each group of charts corresponds to the short delta listed in the heading bullet (8 delta, 12 delta, 16 delta, 20 delta).  Each column corresponds to an IC wing width (column 1 = 25 points, column 2 = 50 points, column 3 = 75 points).

The first row in each group displays the backtest results associated with weekly data, and the second row in each group displays the backtest results associated with monthly expiration data.  Weekly data could result in a new trade being initiated every week (if the entry criteria were satisfied), while the monthly expiration data would result in at most one trade per month (if the entry criteria were satisfied).  The monthly data does represent a subset of the weekly data, but will more closely match actual trade results for traders who initiate on monthly expirations rather than weekly expirations.

Lastly, trades can overlap...which means there can be multiple trades active at any point in the backtesting.  Opening a new trade does not require the prior trade to be closed.

In this post, we'll only review three metrics:

1. Normalized P&L per day
2. Normalized P&L per trade
3. Win rate

Normalized P&L per Day

• 8 delta short strikes (weekly data top, monthly data bottom)
• At 8 delta, the monthly trades show a bit better P&L per day numbers than the weekly trades.

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• 12 delta short strikes (weekly data top, monthly data bottom)
• At 12 delta, the monthly trades again show better P&L per day readings than the weekly trades.  The P&L lines are also more tightly grouped by profit taking level (50, 75, NA) as wing width increases, indicating that profit taking level has a larger impact on P&L per day than IC structure at this delta.  We noticed this same pattern with the 38 DTE ICs.

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• 16 delta short strikes (weekly data top, monthly data bottom)
• The monthly trades continue to exhibit greater P&L per day readings than the weekly trades. As wing width increases, the P&L per day lines become closer to each other and appear to converge.  The 50% profit taking level outperforms the other levels, and this trend is particularly strong in the monthly trade data.  We also continue to see stronger clustering by profit taking level, with IC structure having a smaller impact.

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• 20 delta short strikes (weekly data top, monthly data bottom)
• At 20 delta, the returns associated with the 50% profit taking level generally outperform the other profit taking levels.  We noticed this trend with the 38 DTE ICs also.

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In general, the monthly trades have higher P&L per day readings than the weekly trades, but the weekly trades typically have tighter grouping of their P&L per day lines. Another trend to note is the general slope of these P&L per day lines at 45 DTE versus 38 DTE.  At 38 DTE, most of the P&L per day lines sloped down, while at 45 DTE the P&L per day lines are starting to slope up...greater P&L per day as the loss level increases.  We'll need to see if this trend continues as DTE increase.


Normalized P&L per Trade

• 8 delta short strikes (weekly data top, monthly data bottom)
• In the monthly data, we see that taking the trades to expiration resulted in larger P&L per trade results than either the 50% or 75% profit taking levels..similar to the 38 DTE trades.  The weekly data, shows a similar pattern, but the P&L per trade lines are more tightly grouped.  Lastly, the monthly P&L per trades values are slightly greater than the weekly P&L per trade values.

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• 12 delta short strikes (weekly data top, monthly data bottom)
• Not a large difference between the monthly and weekly data for the 12 delta short strikes. The monthly data has slight out-performance with no profit taking target (ST-NA) with the 50 and 75 point wing widths

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• 16 delta short strikes (weekly data top, monthly data bottom)
• Similar to the 38 DTE ICs, as the wing widths increase, we see convergence of the P&L lines by profit taking level.  As wing width increases, the IC structures have less of an impact on returns than the profit taking level.

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• 20 delta short strikes (weekly data top, monthly data bottom)
• In the weekly data, there is very little difference between the 50% and 75% profit taking levels, particularly with wing widths of 50 points and 75 points.

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There are two clear trends in the P&L per trade values:

1. As wing width increases, the difference between the P&L per trade values for the different profit taking levels and IC structures decreases...the lines become more tightly grouped.
2. In general, as loss taking levels increase, P&L per trade increases with the 45 DTE ICs.
3. The P&L per trade values are slightly greater in the monthly trades than the weekly trades...this is likely a function of more data being available for the weekly trades, which smooths out the extreme positive and negative values

Win Rate

• 8 delta short strikes (weekly data top, monthly data bottom)
• As with the 38 DTE ICs, the 50% profit taking level outperforms the other profit taking levels at 8 delta.  The win rate lines are grouped more by profit taking level than by IC structure type. The delta neutral (DN) structure out-performs the other structures at the 50% profit taking level.

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• 12 delta short strikes (weekly data top, monthly data bottom)
• At 12 delta, the 50% profit taking level continues to outperform the other profit taking levels.  Win rate differences due to structure are less significant.

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• 16 delta short strikes (weekly data top, monthly data bottom)
• At 16 delta, win rate grouping by profit taking level is even more pronounced. The monthly results are also slightly better than the weekly results.

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• 20 delta short strikes (weekly data top, monthly data bottom)
• As with the 38 DTE ICs, at 20 delta, the win rate grouping by profit taking level is even stronger.

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Similar to the 38 DTE ICs, the win rate lines have a steeper slope from the 100% loss taking level to the 200% loss taking level.  The slope tapers off after the 200% loss taking level.  Also, as short strike deltas increase, win rate decreases.

Here are a few of the "take-aways" from the 45 DTE IC backtest results...some are duplicates of the 38 DTE "take-aways":

1. Unlike the 38 DTE ICs, the P&L per trade numbers do not decrease when we move from the 100% loss taking level to the 200% loss taking level.  With the 45 DTE ICs, the P&L per trade numbers increase as we increase the loss taking %. This is more pronounced at lower deltas and larger wing widths.
2. As short strike deltas increase, the 50% profit taking level yields greater P&L per day numbers:
1. The standard IC (ST) has better P&L per day at loss taking levels of 100% and 200%
2. The delta neutral IC (DN) has better P&L per day at loss taking levels of 300% or more
3. As short strike deltas increase, take profits at lower profit taking levels.  
1. At 8 delta, the 75% profit taking level yields greater P&L per trade numbers
2. At 20 delta, the 50% profit taking level yields greater P&L per trade numbers
4. The extra long put structure (EL) generally under performs the delta neutral (DN) and standard balanced (ST) structures.
5. At the 50% profit taking level you will generally be out of your trade for a profit between 16 and 26 days.  If you haven't hit your profit target in 26 days, you should consider closing your trade.
6. The 50% profit taking level has a higher win rate than the other profit taking levels
7. The 100% loss taking level generally has a lower win rate than the larger loss taking levels.

The differences between the weekly and monthly trade data do not appear to be significant.  Going forward, unless I see a notable difference, I will not be publishing the results from the monthly trades.


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