A Big Boy Iron Condor is an Iron Condor in which the width of the spreads are very wide. This is done in an attempt to emulate a short strangle, but with defined risk.
Directional Assumption: Neutral
- Sell OTM Put Spread (>5pt wide)
- Sell OTM Call Spread (>5pt wide)
Ideal Implied Volatility Environment : High
Max Profit: Credit received
How to Calculate Breakeven(s):
- Upside: Short Call Strike + Credit Received
- Downside: Short Put Strike - Credit Received
We approach Big Boy Iron Condors with similar entry tactics to a regular Iron Condor. We shoot for collecting 1/3rd the width of the strikes in premium upon trade entry. For example, if we have an Iron Condor with ten point wide spreads, we will look to collect $3.00 for the trade. This gives us a probability of success around 67%, which is acceptable to us.
When do we close Big Boy Iron Condors?
When we delve into wider iron condors, we open up our closing opportunities from 50% to 25-50%. Since we’re usually collecting a larger credit, we have shown 25% as a profitable closing point as well with previous studies. It will be up to you to determine what your mechanical closing point will be.
When do we manage Big Boy Iron Condors?
We manage big boy iron condors in the same fashion as regular iron condors. We look to roll the untested spread up to collect more premium. We can go as far as rolling our untested spread up to the same short strike as our tested spread, which creates an Iron Fly.
To reset your password, please enter the same email address you use to log in to tastytrade in the field below. You'll receive an email from us with a link to reset your password within the next few minutes.
Register today to unlock exclusive access to our groundbreaking research and to receive our daily market insight emails.
Sign up for a free tastytrade account to download the slides and you’ll also receive daily market insights from our experts and a roundup of our best shows from each day.