Back in the Saddle - Doing Iron Condors

#1

I have been an APEX member since about April of last year. I have not been on the forum for quite some time and had only two or three posts prior. I have not placed a live trade since last year. I traded binary butterflies specifically when I first started. I had turned a $500 live account into $1,850 over a months’ time. I then lost $1,000 of it in a week and have not traded since. I have continued to study off and on over the past year. I decided to get back into it and deposited additional funds into my account to equal $3,000.

I have recently become a huge fan of iron condors. When I first started I never really looked at trading spreads. They were intimidating to look at. As Darrell has mentioned many times, binaries are easier to understand and harder to trade and spreads are harder to understand and easier to trade. I have found this to be true although once I dove in I found them very easy to understand. It is simple addition and subtraction. They ARE much easier to trade.

So over the last two months, I have concentrated on spreads, specifically iron condors. I have watched multiple spreads webinars and have read every article and watched every video I can find on iron condors. It really is an ingenious strategy. Even though you put up a lot of risk it’s not real risk. If you use the stop triggers correctly you will not lose the risk you put up. If you do not have the time to babysit the trade then the stop trigger is for you! If you do have time to watch every trade then you should never have to worry about losing all your risk. During the entire month of August I traded 59 iron condors specifically on all the indices. I put on most of those trades at night but recently started doing some in the mornings as well. I did not trade every day due to time constraints and due to the fact that sometimes I was not comfortable with the trades. All trades were in demo. I set my stop triggers and went to bed and/or in the mornings set my stop triggers and left to go to work. I had numerous issues in the beginning ranging from stop trigger malfunctions, computer issues, or Nadex timing out. These were mostly losing days. I believe these issues have now been resolved.
I simulated a $3,000 demo account and traded just like I will be trading my $3,000 live account very soon. I began by placing my stop triggers at break even then recently began giving myself a little profit cushion and setting my stops a bit tighter rather than setting them further out.

Of those 59 iron condors 41 of them were winning trades. After fees I made $887. This was trading only one contract at a time. To date I have yet to get stopped out on both sides. Including losing trades this equates to $15 per trade. It may not seem like much but it did not take a lot of time. This was also including all of the issues I had. During the rough 8/20 and 8/21 trading days I still profited $116.

Trading multiple contracts would increase this amount exponentially down the road. If am putting on 59 trades per month, 10 contracts at a time, making $15 per trade I would be making $106,440 per year just trading IC’s. I remember Darrell stating in one of his webinars that he knows several traders that make their living trading ONLY iron condors. I can see how and why!

I do not have a lot of time to trade. This seems like the perfect system for me right now. Once I get started trading live I will continue to test out other strategies in demo (time allowing) but I will be trading iron condors daily. The new scanner makes it so much easier to spot and make these trades! Fantastic tool Darrell! Thank so much!

I hope to be posting more down the road as I have practically lived on this site for the past two months. Thank you.

Monkey see, monkey do! Iron Condors and the New Spread scanner
My First Condor :-)
#2

Thats good to hear, do you only set the SL or do you also set the tp on the same spread? when you look for those set ups what premium do you pick is it minimum $25?

#3

Thanks Stanz. I have only set the stop triggers. I probably should set up take profits as well. This would certainly lock in profit if the market reached the spread ceiling on a buy or floor on a sell and then reversed.

I prefer at least $20 of premium on each side and ideally proximity to be as close on each side as possible although when trading the indices I almost never see premiums that low on each side. At night depending upon when I enter, the market may have moved a great deal already and although premiums will still be there, the proximity is way off. I haven’t usually traded these when there has been a huge difference there. Sometimes the market has moved so much in on direction that all the premium is on one side only. Sometimes there are no trades to take. I had trades on for only 13 days this month.

#4

Just to clarify, setting take profits on these would work if I could somewhat watch the trade. If not, then if the take profit or the stop is triggered I cannot be there to cancel the other. This could be an issue if the market reversed after the first trade was triggered.

#5

Hi JMart, Excellent post. I was wondering do you use Darrell’s calculating of expected range technique to analyze the IC? Thanks.

#6

I do have the expected ranges posted on my charts but I usually just go in at night and place the trades. If the premium and proximity are within my tolerance then I will place the trade. Although a small handful of my trades have profited on both sides or not been stopped out on either side, they are almost always going to profit on one side and lose (get stopped out) on the other. I only had one of my 41 profitable iron condors where the profit on the winning side was reduced. All of the rest were 100% profitable on the winning side at expiration.

#7

Hi, When you enter the trades how much time there is left till expiration?

#8

Great post Jmart, keep it up!

#9

Stanz, when I enter the trades at night it will be anywhere from 16-19 hours until expiration. In the morning before I go to work it is generally about 6 - 7 hours before expiration. Monday morning for example I did 5 IC’s and made a total profit of $67 after fees. Tonight so far there have not been any IC opportunities so I have no trades out right now. Tuesday morning I will check again. Hopefully I will find trades in the original spreads released today as well as the 8:00 spreads. If there are none then I will not trade. Sometimes there will not be any trades. I will not force any trades just to trade.

This is my system. Darrell has said many times that we should get to know our system and stick to our system. This is what I plan to do.

Skelton, thanks so much for the encouragement!!

#10

Hi jmart,

I like your approach as I am in a similar situation of not being able trade during the day due to work. It sounds like a great strategy! I understand about wanting at least $20 premium. You also talk about proximity. 1) “ideally proximity to be as close on each side as possible” and 2) that you are looking for proximity to be within your tolerance.

Can you give an example of what you mean? Thanks!

#11

Excellent post. Thanks

#12

Very interesting, where are you placing your stop triggers currently? It sounds like they are set inside the break even point. Is that putting your average loss at basically the fees?

#13

From what I understand for iron condor you want to have at least $30 profit potential cos than the price have more room to ‘‘wiggle’’, today I was trading eur/usd, eur/jpy all IC’s - won them all, trading just 1 contract on each side made net profit $158, I only go for less than $30 profit if market is really flat, small range and very low volume, doing IC’s on indicies contracts which last 22h isnt best idea cos they move a lot now and definately taking trades blindly cos there is big premium will not work cos the premium is there for a reason just like Darrel said in the webinar, you need to have a reason to take the trade. Setting up sl to tight will only mean more losses. Check the forex spreads at arnd 10-11PM EST or before London opens, I was suprised with those $20+ premiums with dead flat market today before the major US news release but than I did a strangle and won it too :wink: Thanks.

#14

mbraun,

I prefer the proximity to be no more than 25% up or down on either side from where the spreads opened. The ideal proximity is when both sides are equal such as +100 and -100 on both sides or basically when the spreads open. That is the best time to enter an IC. This means that the sell price is at the ceiling of the top spread and the buy price is at the floor of the lower spread.

I do not want proximity to be any worse than say +125/-75 for example. That equals 25% on each side. I want to give myself as much time as possible to be right. I look at proximity the same as my risk to enter the trade. The further apart my proximity the further apart my risk on both sides of the trade will be.

If my risk and proximity are too far apart then I have a larger chance of getting stopped out sooner on the side that has the higher profit potential because I have to set the stop trigger for fewer ticks on that side.

I hope this helps.

Jeff

#15

wmiller,

On the attached trade I entered when both proximity and risk were basically equal. If I set my stops at break even on both sides I would set them at 16512 (16407 + lower spread max profit of 104) on the sell side and 16089 (16196 - upper spread max profit of 107) on the buy side.

If I give myself a bit more cushion I will add about 10 ticks to each side so I will buy back at a trigger price of 16502 and sell back at a trigger price of 16099. This strategy does increase my chance of being stopped on both sides and/or being stopped on one side and having part or all of my profit on the other side eaten up. However it has worked so far.

I am afraid of the 1:1 loss strategy and did not have a lot of luck with it when I was testing in demo. Not to say that it is a bad strategy. In fact Darrell recommends it so I know it is a good strategy. if the market goes in one direction and then reverses then I like the 1:1 loss stops. If it is strictly bullish or bearish then the 1:1 loss stops will not work well.

At this point would feel better about setting my stops further out when I have a larger account.

Jeff

#16

jmart interesting strategy, please keep us posted. With the SL being moved closer to each other, I’m surprised after 1 SL being hit it still results in a profitable trade. Meaning market did not drift back toward other stop loss and erode profit. I’ve tried similar method placing SL at inside BE level, but with mixed results. You’ve done more research than me with 59 trades. I wish you continued success! Thanks.

#17

Here are my latest results combined with my 59 original trades. I have done an additional 18 trades since then for a total of 77. I have created a basic spreadsheet that reflects my results:

I should note that even though the average trade amount is not much the total profit is significant. Especially considering that these trades took very little time to do. These still include my screw ups from earlier on. In my last 18 trades I have won 14, lost 3, and was break even on one for a total profit after fees of $393.57. SmallCap is somewhat less profitable due to the fact that there is always less premium available, but still a good win/loss ratio. Overall so far I have been profitable 72.7% of the time. I feel I am getting better. Early on I was just placing trades. Now I am looking at deviations, expected range, etc. I love spreads. I just hope they love me back.

I am also using a trade spreadsheet created by someone on APEX. I have modified it to automatically calculate my stops. Don’t get me wrong I love Darrell’s IC calculator but it is one less step I have to do. I do not have a ton of time so I need to get my trades done as quickly as possible especially if I am trading early in the morning.

To be clear on my strategy: Most of the time they go until expiration. However there have been several occasions where I have placed my trades at night and come back in the morning to find the trade very profitable even though it is still 7 to 8 hours until expiration. Most of the time day trading has not even started yet. I have taken early profit in these situations and then placed additional trades right after that. Also the stop trigger has a tendency to trigger a bit early sometimes especially on US Tech. I believe this is why Darrell says to set the offset to 10 on the stop triggers. As I’ve stated before I also like to add in a bit more cushion as well. In these cases I will usually make anywhere from $10 - $30 more on the losing side and almost always collect full profit on the other side. Although IC’s are intended for markets with low IV (or high IV such as News events will it will usually reverse) I am trading them with the knowledge that one side will get stopped out all the time and the other side will make $10 -$30. We have had calm markets and we have had volatile markets. So far this strategy has endured.

All, I really appreciate the questions/comments and encouragement. It is truly appreciated. I will endeavor to keep you all updated.

Jeff

#18

I am very interested in your strategy. My question Jeff has to do with comment that if you put a trade on at night and in the morning the market has moved enough that you take a TP and then put on another trade if possible on the same index. How do you determine what your TP is. What is your criteria for a TP. Thanks.

#19

Davec,

Due to the nature of the way I am trading them I always expect to lose on one side and profit on the other. I only expect to make $20 - $30 at most on any trade. Any more than that is a bonus. For example if I get up in the morning and one side is up $50 and the other side is down $25 I will close out and take my $25 profit. Time permitting I will then see if I can find another trade. It may not seem like much but it adds up as you can see by my spreadsheet. Especially if I was trading multiple contracts. Please bare in mind that you will need a $3,000 account to trade like this. Due to the nature of IC’s you put up a lot of initial risk (although by using stop triggers it is not real risk). My average risk put up for 4 trades is around $2500.

However I am still trading demo. I have a $3,000 live account funded and ready to go. I will likely trade the rest of this month in demo before going live. I would like to reach 100 total demo trades before going live.

#20

Thanks for your reply. I am still wandering though, if there is profit target that you have written down or have in your mind. Example would be you go to bed and wake up and sides of the trade are still active how much profit needs to be there for you to TP, 10, 15 or 20 plus dollars.

I have started testing this out myself. You may have found exactly what I have been looking for. Yes, understand ICs and I have done ICs on news trading and some on over night currencies if there is enough profit in the spread to do so, I understand the mechanics of the trade. I, like you, made very good money trading IBs on GU, EB and UC on the 1pm to 11pm binaries however, I can’t seem to get the options I did before. I have not been able to do them for the last few months and still can’t find them. Also, I understand the about account size needed and that one side will more than likely get stopped out each trade.

Again thanks for your help and as I test and find any tips i will post them here.