Iron Condor Series - Higher Loss Thresholds

During my series on dynamic exits of iron condors, I received several requests for an expansion of these backtests.  Specifically, people asked if I could run the tests with larger loss thresholds.  I thought this was a good idea.  I've decided to postpone the series on the Strangle options strategy, and instead spend the next five or six weeks looking at iron condors with higher loss thresholds.

For this new series, we will look the following:

(click to enlarge)

As with the prior series, these iron condors will be entered at four different days-to-expiration (DTE): 38 , 52 , 66 , and 80.  For each of these DTE, we will test iron condors with short strikes at four different delta: 8, 12, 16, and 20.

The core of this series is related to the exits.  The following 8 exits will be tested:
  1. STD - NA%:NA% - exit at 8 DTE.
  2. STD - NA%:50% - exit if the trade has a profit of 50% of its initial credit OR 8 DTE.
  3. STD - 100%:50% - exit if the trade has a loss of 100% of its initial credit OR if the trade has a profit of 50% of its initial credit OR 8 DTE.
  4. STD - 200%:50% - exit if the trade has a loss of 200% of its initial credit OR if the trade has a profit of 50% of its initial credit OR 8 DTE.
  5. STD - 200%:75% - exit if the trade has a loss of 200% of its initial credit OR if the trade has a profit of 75% of its initial credit OR 8 DTE.
  6. STD - 300%:50% - exit if the trade has a loss of 300% of its initial credit OR if the trade has a profit of 50% of its initial credit OR 8 DTE.
  7. STD - 300%:75% - exit if the trade has a loss of 300% of its initial credit OR if the trade has a profit of 75% of its initial credit OR 8 DTE.
  8. STD - 400%:50% - exit if the trade has a loss of 400% of its initial credit OR if the trade has a profit of 50% of its initial credit OR 8 DTE.
To clarify how these exits function, let's look at an example of the STD-200%:50% variation.  If we sell a 1-lot iron condor for $200, we would take our loss when the condor had to be bought back at $600.  $600 - $200 = $400, or a loss of 200% or our initial credit.  For this example, our profit taking would occur when we could buy back the iron condor for $100.  $200 - $100 = $100, or 50% or our initial credit.  

These exits can also be thought of as risk:reward exits.  Using the prior example of the STD-200%:50%, we are risking 200% to make 50%.  These odds don't sound great from a classical stock strategy approach, but the win rate and probabilities of exit are key components of options strategy profitability.


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