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Wide Iron Condors: Double Double

Market Measures

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

When setting up strangle replacement trades, we often look at buying cheap wings against our short options. This is essential to reducing buying power reduction, especially in an IRA.

Often when buying cheap wings, the call spread ends up being much tighter than the wide put spread. This is due to normal put skew in equities and equity ETFs. Given that the put spread is often double the width of the call spread, does it make sense to add a second call spread for no additional capital?

The Study

The team utilized SPY options from 2005 to Present:

  • 45 DTE
  • Short 30 Delta Strangle (Long 5 Delta Wings)
  • Compared:
  • 1 wide put spread, 1 wide call spread
  • 1 wide put spread, multiple call spreads (as many as possible without increasing total BPR)
  • Managed at 50% of Max Profit (where possible)
The Results

Nearly 60% of all trades analyzed had at least 2 call spreads to the 1 put spread.

Adding the second (or third) call spread did increase the risk to the upside, however, the win rate and average P/Ls also increased.

Check out the video for the full results and study breakdown!

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