TRADING IDEA: IWM 101/105/113/117 "PROBABILISTIC" IRON CONDOR
There are several different ways to set up iron condors, one of which is to set it up using given strikes' percentage of being out of the money at expiration; another way is to set up the IC using the delta values for each individual option.
In this particular case, I'm using the "probabilistic" method. In this particular case, each long option is about at the 15% probability ITM strike and each short option is about at the 70% probability out of the money strike. This relieves me of having to look at each individual option's delta and tweaking this and that to get a fairly delta neutral setup.
The additional criteria I'm using for this particular setup is that I attempt to get at least 1/3rd the width of spread in credit. Since the wings are four strikes wide, I'm looking to get at least 1/3rd of the width or about 1.33 in credit for putting it on.
These are the metrics for the setup:
Probability of Profit: 52%
Max Profit: $140/contract
Max Loss/Buying Power Effect: $260/contract
Delta: -6.45
Notes: Unfortunately, with volatility this low in the broad market, twisting premium out of index ETF's is difficult here (even though IWM is the "best of the bunch") ... . This is why you always go small, dispersing risk across a large number of setups put on at different times in different expiries and at different price points.
In this particular case, I'm using the "probabilistic" method. In this particular case, each long option is about at the 15% probability ITM strike and each short option is about at the 70% probability out of the money strike. This relieves me of having to look at each individual option's delta and tweaking this and that to get a fairly delta neutral setup.
The additional criteria I'm using for this particular setup is that I attempt to get at least 1/3rd the width of spread in credit. Since the wings are four strikes wide, I'm looking to get at least 1/3rd of the width or about 1.33 in credit for putting it on.
These are the metrics for the setup:
Probability of Profit: 52%
Max Profit: $140/contract
Max Loss/Buying Power Effect: $260/contract
Delta: -6.45
Notes: Unfortunately, with volatility this low in the broad market, twisting premium out of index ETF's is difficult here (even though IWM is the "best of the bunch") ... . This is why you always go small, dispersing risk across a large number of setups put on at different times in different expiries and at different price points.
