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Iron Condor Wing Efficiency Part 2

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Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

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.

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