Market Measures

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Increasing Size in Iron Condors

Market Measures

When trading an Iron Condor, we can mimic the risk of a wider Iron Condor with a larger quantity of tighter Iron Condors. In this segment of Market Measures, we compare selling one wider Iron Condor with multiple tighter Iron Condors that equate to the same risk.

Study
  • S&P 500 (SPY), 2005 to Present
  • Using 45 DTE options, sold Iron Condor:
    • Short 30 Δ options & Long $6-wide wings
    • Short 30 Δ options & Long $3-wide wings (x2)
    • Short 30 Δ options & Long $2-wide wings (x3)
      • Managed trades at 50% of max profit
Results
  • Since Iron Condors have a defined amount of risk, we can reduce the spread width and increase the size to equate the risk while increasing the credit.
  • Although these equate to the same risk, the tighter Iron Condor performs worse because it has max loss reached more often than the wider Iron Condor.

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