*This is from a Udemy course by Steve – firstname.lastname@example.org
- Look for ETF’s and Index’s first, before considering stocks
- Find Underlyings with the Highest IV. It is best if both IV Rank and IV Percentile are above 50, but Steve says one above 50 is adequate
- Optimal time to expiration is 45 days, but anywhere from 30-60 is OK
- Only use monthly options. Weekly’s are not as liquid
- Try to trade options with a bid/ask spread from 1-3 cents. Don’t consider over 10cents unless the option is very high priced.
Choose strike prices for the Iron Condor using strikes that are 20% Probability of being ITM. If the strike isn’t right at 20% ITM, choose the one that is slightly higher. The Max Loss of any trade should not exceed 3X Max Profit. Check this in the confirm and send area of the platform. Try to get filled at the Mid Price. From the videos, it is clear that Steve will adjust the entry using the little slider at the bottom of TOS to just get the trade going, even if it costs a few cents.
*Note: If there are no options in the 30-60 day expiration range, go to the analyze tab and look at THETA for the <30 day and >60 day options. Look at the the THETA for each option. This shows the potential daily profit for each trade. You can use this information, plus the break even range to chose the best trade that you can find.
INDEX/ETF’S (WING WIDTH)
SPY – S&P 500 (3 points)
SPX – S&P 500 (30 points)
NDX – Nasdaq (30 points)
QQQ – Nasdaq (3 points)
IWM – Russell 2000 (3 points)
RUT – Russell 2000 (30 points)
DIA – Dow (3 points)
TLT – 20+ year bond (3 points)
FXE – Euro Currency (3 points)
GLD – Gold (3 points)
FUTURES (WING WIDTH)
/ES – S&P 500 (15 points)
/ZB – 30 year bonds (2 points)
/CL – Crude Oil (1 point)
/GC – Gold (10 points)
/NG – Natural Gas (.1 points)
/6E – Euro Currency (.01 points)
/ZS – Soybeans (10 points)
/ZC – Corn (5 points) GS – Goldman Sachs (1 point)
/ZW – Wheat (10 points) IBM (2 points)
STOCKS (WING WIDTH)
AAPL – Apple (1 point)
GOOG – Alphabet (10 point)
TSLA – Tesla (10 points)
FB – Facebook (5 points)
COST – Costco (1 point)
AMZN – Amazon (10 points)
NFLX – Netflix (1 point)
Exit at 40% of Max Profit. The Tasty Trade research shows that this results in a win rate of around 85% and earns more over the long run.
When price breaches one side’s Break Even point, it is time to adjust. In the Analyze tab, you can click off the tested side of the trade’s legs to see how much profit has been realized for the untested side’s legs
- Exit the untested side
- Exit remainder of position at least 5 days before expiration
*this isn’t much of an adjustment really. It does get you the max profit for the untested side though.
If there is >20 days until expiration, add another Iron Condor.
- Exit the untested side
- Add new IC centered around the current stock price, using the same # of contracts
- Manage new Iron Condor as normal
*This adjustment version basically grabs more premium