August 17, 2017

SPX Iron Condor

Please click the following link to access the SPX Iron Condor summary. 

SPX Iron Condor Trade for the December 2007 Expiration Cycle  The increase in volatility has not phased the SPX Iron Condor strategy. The strategy made 7.9% over the last four week expiration cycle and 25.1% since we initiated our new guidelines for the strategy. Essentially, the way we trade Iron Condors has changed dramatically since our last loss in August. We allow probability to work for us. Let me explain. 

The win ratio for the strategy has been good. The strategy has had 9 out of 12 successful trades for a win ratio of 75%. However, two out the three losses have exceeded 50% which has led to cumulative losses in the strategy over the past twelve months. 

We basically implemented a new SPX Iron Condor strategy on 8/28/07. The new strategy entailed using the power of probability as the chief guideline. We now aim for ranges that have a probability of success that exceed 80% and often 86%. This allows the strategy to use a large range for the underlying S&P (SPX) to move up or down within a four week cycle. For example, over the past three expiration cycles we have used a range of 240 and 260. This month we were able to use a 300 point range. A range of 240, 260 and 300 points allows for the underlying SPX to move roughly 8.6% – 10.4% up or down (obviously depending on the range) before the strategy is in jeopardy of taking a loss. That’s a total range of between 17% – 20% (again, depending on the range) for the underlying SPX to move vacillate around in. 

By choosing a higher probability trade, the strategy gains the comfort of using a very wide range. This makes for more successful trades (a higher win ratio) and less adjustments. 

The downside is that we will receive less premium than if we chose to go with a tighter range. Furthermore, the losses, when they occur are typically larger as more money is at risk. However, we have several ways to combat and effectively manage the risks and losses when they occur because like all strategies, losses are inevitable. 

Implementing strict position sizing is the only effective way, in our opinion, to combat the losses that will inevitably occur in the strategy. This is typically the case for most strategies, but for Iron Condors it is in our opinion, mandatory. 

If you have any questions or comments, please do not hesitate to email us at support@crowderinvestments.com

Overbought/Oversold for November 26, 2007

S&P (SPY) – 31.3 (neutral)

Russell 2000 (IWM) – 29.3 (oversold)

Dow (DIA) – 31.2 (neutral)

Nasdaq 100 (QQQQ) – 32.2 (neutral)

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