What delta of long strikes makes the ideal risk-reward scenario for an iron condor?Study
- SPY, 2005-present
- 45 days to expiration
- 30 delta short put and call
- Compared average P/L and average max loss for varying long wings:
- 20, 16, 10, 5, and 1 delta long put and call
We find that buying past the 10 delta wings (5 and 1 delta) produces an unfavorable risk-reward scenario since your potential risk begins to outpace your average returns.