The Dark Side of Tom Sosnoff's Iron Condor Strategy
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- Опубликовано: 10 сен 2024
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Thank you for this helpful summary. In these research segments, I would be interested to see histograms of the P/L distributions. There is discussion about how the distributions compare, but I think it would be even more compelling to see comparisons of the actual distributions. Histograms are easy to create using the Analysis Tool Pack in Excel, for example.
Thanks guys. I always knew wider was better. I personally do it by delta. Like to sell 20, but 10. But I always had a hunch they were faster to hit 50%. Glad to see that hunch was correct.
Delta seems more logical, but how are you dealing with put / call skew vs your BPR? Are you ending up with different widths (in $ amount) often? How does that affect your BPR? Thanks in advance!
@@pragmatica1032I have same question. Mine seem to be highly skewed often, especially when trading on less liquid/more uncertain products than SPY. I still stick with the mechanic of “equal delta (NOT equal price)”…
This lesson is so important! Very happy to have watched this over the week-end as I was just about to enter in a narrow wing IC this week...
Excellent analysis. It seems counterintuitive, likely many options traders use smaller wings. Well explained.
Is there a reason why fees and commissions are included in the calculations? I think it would further drive the point that $1 wide isn't very practical on the 45dte due to the % of that credit eaten by fees. On slide 3, the avg. P/L would go from -$.3 to -$5.3 if you assume $5 per trade in fees and commission.
Exactly. If managed at 50%, commissions really cut into profit.
$1 wide - 31% commission
$2 - 15%
$3 - 10%
$5 - 6%
That is why low iV environment is not very attractive.
How would the profit profile for butterflies behave if we increase width of wings, let's say $5, 10 and 20? Will it be identical to iron condors?
I am curious why so many TastyTrade videos reference on $-wide wings on SPY rather than Delta-wide wings on any stock/ETF. Wouldn’t explanations using Delta-focused examples be more descriptive?
I’ve always wondered this…or at least describe using a percentage% of the stock price. Just the width alone doesn’t help a lot and it’s confusing me. Have you found an answer??
It appears, the assumption is that a trader would allow the price to reach his/her short strike, in which case it would then be easy to hit the long strike, as well. However, what if a trader was willing to manage the spread or an iron condor more closely and expand the narrow wing (say, 5 points on SPX) into a wider wing (say, 10 points on SPX) when rolling up/down and out to get additional credit while reducing the risk of the short strike being reached? How, if at all, would this change the discussion around narrow wings?
expanding the wing width as part of a rolling/management strategy tends to increase risk disproportionately to the amount of additional credit received by doing so. expanding the wings can save a breached trade if the underlying treads water or moves favorably, but can result in a much worse condition if the underlying continues to move against the trade. I have found that it is usually better to take a smaller loss and move on, rather than to double-down and increase the capital at risk in a breached trade.
Rarely do you get out ahead by doubling down.
Fantastic video! Thank you very much. It would be interesting if you would stratify for the difference in Delta as opposed to the width of the wing. So instead of saying five dollars wide say 15 to 20 Delta wide. I’m just curious if that has any impact or just less variability
So, if I do an iron condor 45 days out with the short put and call set at a 10 Delta, there is more risk if my long positions are closer to my short positions? Why?
Well there’s more “risk” if your long strikes are FURTHER from the shorts (wider spread) as you don’t have as much protection. But you will get more credit this way
Wow great info, thanks alot for sharing it 😅😅
What about losses? Wide iron condor has maximum loss than small iron Condor.
If you are using 0dte, this is useless.
Because the credit is so tiny, that any width will eat it out x10 fast.
I use statistic and trade IC 0dte. To expiration. If I close them early, I reduce my reward to risk dramatically and the statistics I looked at become irrelevant. So theoretical proft? No... real.
If I trade 1:2 reward to risk, and let it expiry, then I know I need 70% win rate approx
They said in this video that they are basing it on 45 DTE, if this was for 0dte it would be a different video
It is the tricky point of early management, while the p/l degrades the win rate also increases.
how do I conduct such a research myself!
Now what about holding a $1 wide weekly for 4 days; $2 wide two weeks out for a week; $3 wide three weeks out for a week... The gradual size increase with the duration lessoning the volatility is an interesting exercise if all you are going for is a .30 win with each strategy. Because lets face it a strangle gets bought 4 weeks and closed at 2 weeks. So depending on size of underlying, 2 weeks out a $5 wide till expiration might be more like the strangle 5 weeks out
Think or Swim desktop edition lets you analyze potential return based on time in the trade. Risk graph changes to show how the wings help at first but hurt over time. Tasty has a little bit of forward analytics but not as nice. $100 account with tos gets you all the software...
Do it on think or swim paper trade and let us know your study results
horrific audio.. but informative
This was very poorly described as to what the difference was in the beginning as to the reason why someone would intially put on a wide IC or narrow IC so you lost people that need to learn form the beginning because you did not explain the premise.
Tom, get your Risk department under control.
I am definitey confused
The chart on slide 5 is very telling.
To me, risk reward is very important in those trades.
Cause when it pops, it's usually max loss.
If you don't collect max gain in a statistically designed system... you are off.
You should watch more educational from tasty and paper trade to become comfortable. Risk management will prevent you from max loss. Manage those trades brotha
New traders and old traders don't follow a mandated verbiage. So you did not explain your words from the very beginning as to what you mean what is how wide. Are you talking a how wide the sold call and sold put is? Or how wide the sold call is from the bought put and conversely the width between the sold call and bought call. Which one what? So it is like you guys are having a conversation that you let some people in the door half way through the conversation but did not explain w t F you guys are talking about..... And I have been trading years and literally will show my account at 18k to 23k a week and hold a full time job. 1.50 cents spread between what and what?????!!!! Wider wings what? What part of the wings wider?!!!!!