Take-out:
This strategy only works at earnings and for high priced stocks. For lower priced equities the short strikes get too tight and it's hard to collect enough premium.- Entry: 2 years in AAPL, NFLX, AMZN, GOOG, and MA
- High IV Rank (above 50%)
- Sell iron condor 1 day before earnings
- Compare:
- Collect 45-50% of the width of the strikes (risk = 50-55%)
- Collect 33% of the width (risk = 67%)
- Sell shorts at 1SD (risk = 84%)
- Exit:
- Close (BTC) 1 day after earnings
Note: Increasing the credit taken in reduces the risk (possible loss) but also decreases the probability of success.
When used in the appropriate situations this strategy outperformed the 'standard' strategies in P/L, drawdown, and expected winners. Collecting 50% of the strikes should have resulted in a 50% success rate and yet was actually profitable 60% of the time. (1SD iron condors have an expected success rate of 68.2% while the 33% trades should win 67% of the time)
No comments:
Post a Comment