RUT Iron Condor - Dynamic Exit - 52 DTE - 8 Delta

In this post we will look at the backtest results for dynamic exits of 52 days-to-expiration (DTE) Iron Condors (IC), with 8 delta short strikes, with different profit and loss exits.  This is a non-directional options trading strategy that seeks to profit from a market that stays within in a range between the two short strikes of the Iron Condor.

For some background on how the results are presented, please review the dynamic exit posts found on the summary page: Dynamic Exit Iron Condor Articles.

As discussed in the two overview posts on the summary page above, we will look at the same three Iron Condor starting structures that have been backtested on this blog: Standard (STD), Delta Neutral (DN), and Extra Long Put (EL).

Also as discussed in the two overview posts, we will look at three different exits on each of these three starting structures:
  • ML40% - this is a Margin Loss % Exit.  Trades using this exit strategy either exit at 8 DTE OR if the trade has a loss greater than 40% of the margin requirement for the trade. (ML40% = Max Loss 40%)
  • BSP - this is a Price Movement Exit.  Trades using this exit strategy either exit at 8 DTE OR if the price of the underlying (RUT) moves below the strike of the short put.  (BSP = Below Short Put).
  • 0.6:0.6 - This is an Initial Credit % Profit/Loss Exit. Trades using this exit strategy either exit at 8 DTE OR if the trade has a profit of 60% of its initial credit OR if the trade has a loss of 60% of its initial credit.  

This equity curve chart below is similar to the equity curves in my prior posts.  In the chart below, all of the STD Iron Condor versions have blue equity curves, all of the DN Iron Condor versions have green equity curves, and all of the EL Iron Condor versions have red equity curves.  The solid lines represent the equity curves for the "no touch" version, while the dashed lines represent the equity curves for the dynamically exited versions.


Iron Condor Dynamic Exit Equity Curves RUT 52 DTE 8 Delta All Versions
(click to enlarge)

Again, the Standard Iron Condor options trading strategy (STD) without a dynamic exit yielded the highest overall return.  The second highest overall return was STD-ML40%, or the standard with a 40% margin loss exit.

The details associated with each of the starting structure backtests can be found in the posts below:

In the next post I will show the results for the 52 DTE, 8 delta short strike Iron Condor options trading strategy, with varying Initial Credit % Profit/Loss Exits.

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Momentum Rotation Strategies and Data - Part 4

Momentum Rotation Strategies and Data - Part 4

In the last three posts (Part 1, Part 2, Part 3), we looked at how dividend adjusted data and non-dividend adjusted data generate different results with Momentum Rotation Strategies.  We also looked at a hybrid approach using the signals generated from the non-dividend adjusted series, combined with the returns from the dividend adjusted series.  As expected all three approaches generated different results.

I started this review of data approaches because I was/am seeing fund ranking instability in my live trading.  For example, one of my Mutual Fund Rotation Systems signaled an entry into Fidelity Leveraged Company Stock (FLVCX) on Wednesday, April 30, 2014.  On the last trading day of the next month, Friday, May 30, 2014, I received a signal to hold my position of Fidelity Select Chemicals Portfolio (FSCHX).  The issue...my position was in FLVCX, not FSCHX.  In this particular example, the dividend issued in April to FSCHX had an impact on this fund's rank in later runs.  FLVCX did not have a dividend issued during this period.

During the last several days, I reviewed all of the code of my Momentum Rotation Strategies and found that dividend adjusted data should result in stable ranking as dividends are issued.  I also analyzed several ETFs to determine if their ROC values were stable across dividend issuance.  Theoretically, ROC values should be stable with the Yahoo/CSI dividend adjusted data, and I did find this to be correct.  My analysis of EEM can be found here.

At this point, the issue I am seeing is most likely being caused by a rare error with the Yahoo/CSI data related to dividends.  My current theory is that this is being caused by a late addition of a dividend to the time series.  For example, say a dividend was issued on April 11, 2014, but not added to the time series.  Then at some point in the future, say May 1, 2014 the error is discovered and the dividend is added to the April 11, 2014 date.  If this situation were to occur, then the ranking on April 30 would change.  This is purely speculation at this point, but it could be the cause of the situation that I am seeing occasionally in my live trading.

Starting this month, I am going to be taking snapshots of my AmiBroker database at the end of each month.  This should help me find the exact cause of this ranking instability that occasionally crops up during the year.  Thanks to Cesar Alvarez for this tip!

I will have another post on this topic after I am confident in the cause of my ranking instability.

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Momentum Rotation Strategies and Data - Part 3

In this post we will look at the results for a Momentum Rotation strategy that ranks funds based on the sum of two rate-of-change (ROC) values.  We will use the same portfolio of ETFs discussed in Part 1 and Part 2 of this series.

So far this series has started a number of good conversations, trying to find an explanation for my results.  I appreciate all of your comments, and would be delighted if you could find an alternate explanation for my results!  At the end of this post I will include the AFL code I used in AmiBroker to generate the results in Part 2.  The primary AFL indicator that I am using for rotation ranking is ROC.

The strategy discussed in this post works as follows.  On the second to last trading day of the month, the strategy calculates the 60 day ROC and 120 day ROC for each fund in the portfolio based on closing prices on that day.  It adds these two values together, and if the sum is negative it reassigns the sum a value of 0.  It then ranks all 10 funds, selecting the fund with the highest rank.  If all funds have a rank of 0, the system will move to cash.  On the last trading day of the month, it executes the buy and sell orders at the close - "market on close" orders in live trading.

In the diagram below, three equity curves are displayed for a 60 day / 120 day dual momentum Rotation System.  

60 Day / 120 Day Momentum Rotation Strategy Equity Curves
(click to enlarge)
The blue curve labeled "Adjusted" is the equity curve generated from our momentum system using dividend and split adjusted data.  The signals and P&L are derived only from the adjusted data time series.  The red curve labeled "Actual" is the equity curve generated from our momentum system using only split adjusted data, that has not been adjusted for dividends.  It is lower, as expected, since dividends are not included.  The green curve labeled "Hybrid" is the equity curve generated from our momentum system using the "Actual" time series for signal generation and the "Adjusted" time series for the P&L calculation.  This is a two step process...first the system is run across the "Actual" time series data to derive the trade dates and ETFs selected.  The second step uses the dates and ETFs selected in step 1 to to calculate P&L from the "Adjusted" time series data.

What we can see in the next two images are the signals, or ETFs selected, by the strategy from the "Actual" data set and the "Adjusted" data set.  The chart below shows the ETFs selected (and held) by the strategy by date using the "Actual" time series data.

(click to enlarge)

The chart below shows the ETFs selected (and held) by the strategy by date using the "Adjusted" time series data.  Similar to the 60 day momentum strategy, the signals do not match.

(click to enlarge)

As I mentioned to some readers today, I am using Yahoo adjusted data in my "Adjusted" data database, and Yahoo non-adjusted data in my "Actual" data database.  Here are two links from Yahoo that discuss their data source for historical data (it's CSI), and their approach for dividend adjusting data:


Also, here is the AmiBroker AFL code that was used in Part 2 of this series:

SetBacktestMode( backtestRotational );

// 1 ###### BACKTESTER SETTINGS - 1. GENERAL TAB
SetOption("InitialEquity", 100000);
SetOption("MinShares", 1);
SetOption("MinPosValue", 0);
SetOption("FuturesMode", False);
SetOption("AllowPositionShrinking", False);
SetOption("ActivateStopsImmediately", False);
SetOption("ReverseSignalForcesExit", False);
SetOption("AllowSameBarExit", False);
RoundLotSize = 0;
TickSize = 0;
MarginDeposit = 0;
PointValue = 1;
SetOption("CommissionMode", 2);
SetOption("CommissionAmount", 7.95);
SetOption("InterestRate", 0);
SetOption("AccountMargin", 100);
SetOption("MarginRequirement", 100);

// 2 ###### BACKTESTER SETTINGS - 2. TRADES TAB
BuyPrice = SellPrice = ShortPrice = CoverPrice = Close;
SetTradeDelays( 1, 1, 1, 1);

// 5 ###### BACKTESTER SETTINGS - 5. PORTFOLIO TAB
//SetOption("MaxOpenPositions", 1);
// check the box to "Add artificial future bar..."
// Limit trade size as % - use 10 for live trading
// check the box to "Disable trade size limit..."
SetOption("UsePrevBarEquityForPosSizing", False);
SetOption("UseCustomBacktestProc", False);

// 6 ###### BACKTESTER SETTINGS - 6. WALK FORWARD TAB
//SetOption("WorstRankHeld", 1);


Totalpositions = 1;
SetOption("WorstRankHeld", 1);
SetOption("MaxOpenPositions", Totalpositions );
PositionSize = -100 / Totalpositions ;

LastDayOfMonth = IIf( (Month() == Ref( Month(), 1) AND (Month() != Ref( Month(), 2)) ), 1, 0);
TradeDay = LastDayOfMonth ;

Score = ROC(Close, 60);
PositionScore = IIf(Score < 0, 0, Score ); // Long only
PositionScore = IIf(TradeDay , PositionScore , scoreNoRotate);

//Exploration
Filter = 1;
AddColumn(Score ,"Score",1.1);
AddColumn(PositionScore ,"PositionScore ",1.1);
AddColumn(PositionSize ,"Position Size",1.1);

You can download the AFL code above from my Google Drive: 00_60DayMomentum.afl

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Momentum Rotation Strategies and Data - Part 2

In Part 1, I discussed an issue that can occur when using dividend adjusted price data in Momentum Rotation Strategies that select funds based on a relative ranking algorithm.  I outlined three different data approaches that can be used, and presented a simple rotation strategy and portfolio to illustrate this data issue.  For additional background please see Part 1, and my older post: Historical Data and Momentum Rotation Strategies

In this post we will dive right into the backtest results.  In the diagram below, three equity curves are displayed for the simple 60 day dual momentum Rotation System outlined in Part 1.

60 Day Momentum Rotation Strategy Equity Curves
(click to enlarge)
 The blue curve labeled "Adjusted" is the equity curve generated from our momentum system using dividend and split adjusted data.  The signals and P&L are derived only from the adjusted data time series.  The red curve labeled "Actual" is the equity curve generated from our momentum system using only split adjusted data, that has not been adjusted for dividends.  It is lower, as expected, since dividend are not included.  The green curve labeled "Hybrid" is the equity curve generated from our momentum system using the "Actual" time series for signal generation and the "Adjusted" time series for the P&L calculation.  This is a two step process...first the system is run across the "Actual" time series data to derive the trade dates and ETFs selected.  The second step use the dates and ETFs selected in step 1 to to calculate P&L from the "Adjusted" time series data.

For this example, I selected a portfolio of ETFs and a Rotation System that had a small difference between the Hybrid and Adjusted data equity curves.  If Adjusted data did not have an impact on ranking, then the two curves would exactly overlap.

What we can see in the next two images are the signals, or ETFs selected, by the strategy from the "Actual" data set and the "Adjusted" data set.  The chart below shows the ETFs selected (and held) by the strategy by date using the "Actual" time series data.

ETF Holdings By Date From Actual Data Signals
(click to enlarge)
The chart below shows the ETFs selected (and held) by the strategy by date using the "Adjusted" time series data.  It is obvious when comparing the chart above with the cart below that the signals, or ETFs selected do not match...although they are close!

ETF Holdings By Date From Adjusted Data Signals
(click to enlarge)
In my view, this is a pretty clear sign that using dividend adjusted price data will cause your relative ranking systems to generate results, and signals, that will change with time.  I have experienced this first hand with my live rotation systems.  Occasionally I will receive a signal to sell one ETF and buy another ETF...where the ETF I am supposed to sell is not the ETF that I am actually holding from the prior month's signal...when real money is on the line, understanding the cause of this situation is vitally important!

In the next post, we will look at another example...

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Momentum Rotation Strategies and Data - Part 1

I am going to take a short break from reviewing backtest results for different variations of Iron Condors, and revisit Momentum Rotation strategies.  In a past post (Historical Data and Momentum Rotation Strategies), I discussed how data choices impact the repeatability of ranking output typically used in Momentum Rotation strategies.

I'll summarize a bit of what I discussed in that last rotation post...

I have been trading monthly Momentum Rotation strategies across six accounts for several years.  These strategies rank portfolios containing between 10 and 30 ETFs or mutual funds by momentum.  Some of my strategies combine multiple momentum readings to derive a rank, while others go further and add filters.  The key point here is that all my rotation strategies rank a basket of funds relative to each other...and this is a common approach across all rotation systems, not just mine.

Now to the crux...the data used by rotation systems has an impact on individual fund ranking scores.  Most rotation strategies that are published on the internet (commercial systems, blogs, etc) use split and dividend adjusted price data to generate the ranking scores.  The entire adjusted price data series changes with every dividend that is issued, which changes all past prices in the time series.  When a dividend is issued for one of these funds today, all of the past adjusted prices change, which will change the past rank scores for that fund.  When the past rank scores change, a fund that was in position 1, can move to position 2, which then changes the backtest results.  I will show two examples of this issue in this post and subsequent posts.  This situation does not occur when non-adjusted price data is used.

When you implement a Rotation System, or any system for that matter, you can use: 1) split and dividend adjusted price data...I'll refer to this as "adjusted" data in the rest of this post, 2) split adjusted only data...I'll refer to this as "actual" price data in the rest of this post, or 3) a hybrid where "actual" price data is used for ranking/signal generation, and "adjusted" price data is used to determine strategy P&L.

----

We will look at the results for each of the three data approaches above for a simple rotation system.  Our system will only look at the 60 day rate of change for ranking and will pick the ETF with the largest positive change in the portfolio.  If all of the ETFs in the portfolio have a negative rate of change...a price today that is lower than the price 60 days ago, then the system will move to cash.  The system will only rank the ETFs in the portfolio on the last trading day of the month.

The ETFs in the portfolio include:

I have included screenshots from Yahoo Finance for each of these ETFs, that show how the actual price and adjusted price can deviate over time as dividend payments are added into the adjusted price time series.

EEM - on Jan 3, 2007 the close was 115.14, but the adjusted close was 32.99
(click to enlarge)

EFA - on Jan 3, 2007 the close was 73.51, but the adjusted close was 57.75
(click to enlarge)

FXI - on Jan 3, 2007 the close was 116.40, but the adjusted close was 32.91
(click to enlarge)

IEF - on Jan 3, 2007 the close was 82.68, but the adjusted close was 64.90
(click to enlarge)

IYR - on Jan 3, 2007 the close was 83.87, but the adjusted close was 59.47
(click to enlarge)

SHY - on Jan 3, 2007 the close was 80.04, but the adjusted close was 70.24
(click to enlarge)

SPY - on Jan 3, 2007 the close was 141.37, but the adjusted close was 119.69
(click to enlarge)

TIP - on Jan 3, 2007 the close was 99.23, but the adjusted close was 76.67
(click to enlarge)

UUP - on Jan 2, 2008 the close was 23.49, but the adjusted close was 23.33
(click to enlarge)

XLV - on Jan 3, 2007 the close was 33.50, but the adjusted close was 28.88
(click to enlarge)
In Part 2, I will show the results from this Rotation System for the three different data approaches listed above.

...to be continued...

Iron Condor Structure Alternatives

This post will be a quick review of Iron Condor option strategy starting structures.  I will begin with the three starting structures that I have used for backtesting on this blog.  We will then move on to a few other structures, with some discussion on how these structures can be modified and/or combined.  Two other related posts can be found here:

All of the Iron Condor starting structure risk graphs below were created last Wednesday (March 4, 2015) after the market close, when the RUT closed at 1230.73.  In each screenshot the maximum theoretical profit is displayed in red in the lower left-hand side of the risk graph.  Lastly, all of the simulated positions are shown at 71 days to expiration (DTE), with 20 point wide credit spreads with the short calls and puts at approximately 8 delta.


Standard Iron Condor
Iron Condor 71DTE
(click to enlarge)
This is a standard balanced Iron Condor.  This structure works well in a neutral / consolidating market.  Backtests for different delta and DTE variations of this option strategy were shown on this blog between May and September 2014.  Details from the simulated trade above:
  • Reg T Margin / Max Risk:  $17,630
  • Max Theoretical Profit:       $2,370
  • Delta: -19.593
  • Theta: 43.964
  • Vega: -419.694


Delta Neutral / Unbalanced Iron Condor
Iron Condor Unbalanced Delta Neutral 71DTE
(click to enlarge)
This is a delta neutral / unbalanced Iron Condor.  The Iron Condor above had its call spreads reduced from 10 to 5 in order to drop the position deltas from -19 to -1.  This structure works well in a neutral to up-trending market.  Fewer call spreads also means lower theta and a lower position vega.  Backtests for different delta and DTE variations of this option strategy were shown on this blog between September and November 2014.  Details from the simulated trade above:
  • Reg T Margin / Max Risk:  $18,265
  • Max Theoretical Profit:       $ 1,735
  • Delta: -1.570
  • Theta: 31.078
  • Vega: -274.978


Extra Long Put Iron Condor
Iron Condor with Extra Long Put 71DTE
(click to enlarge)
This is a standard balanced Iron Condor with an extra long put.  This structure is used to reduce position risk if a market drop occurs.  The extra long put means a lower theta and vega, but a greater delta.  Backtests for different delta and DTE variations of this option strategy were shown on this blog between November and December 2014.  Details from the simulated trade above:
  • Reg T Margin / Max Risk:  $18,100
  • Max Theoretical Profit:       $1,900
  • Delta: -26.151
  • Theta: 31.348
  • Vega: -349.938


Iron Condor With A "Unit" Put
Iron Condor with Extra Long Unit Put 71DTE
(click to enlarge)
This is a standard balanced Iron Condor with an extra long put well below the long puts of the put credit spread.  A unit put is in the 1 to 3 delta range and typically costs about $1.  This structure is used to protect against a max loss during an extreme downside market move.  A unit put can be used with any of the Iron Condor structures and has little impact on the ATM delta, theta and vega.  Backtest results for this structure have not been shown on this blog.  Details from the simulated trade above:
  • Reg T Margin / Max Risk:  $17,740
  • Max Theoretical Profit:       $2,260
  • Delta: -20.826
  • Theta: 39.913
  • Vega: -402.229


Iron Condor With "BatMan Ears" / Embedded Long Strangle
Iron Condor with Embedded Long Put and Call BatMan Ears 71DTE
(click to enlarge)
This is a standard balanced Iron Condor with an embedded long strangle.  The long put and call of the strangle inside the Iron Condor create two peaks in the structure that resemble Batman Ears.  This structure is used to control P&L and deltas in order to delay the need for early adjustments.  The extra longs have a significant negative impact on position theta, but a positive impact on position vega.  An embedded strangle can be used with any of the Iron Condor structures, and can be positioned in many different locations inside the Condor.  The longs can also be moved to the point that they overlap, creating a straddle...resulting in a V shape in the Condor, or V-Condor.  Quantities of spreads and strangles have to be adjusted in order to create a profitable starting structure.  Backtest results for this structure have not been shown on this blog.  Details from the simulated trade above:
  • Reg T Margin / Max Risk:  $14,920
  • Max Theoretical Profit:       $1,080
  • Delta: -15.066
  • Theta: 16.190
  • Vega: -196.379


Iron Condor With Embedded Put Debit Spread
Iron Condor with Embeddeed Debit Put Debit Spread 1 71DTE
(click to enlarge)

Iron Condor with Embeddeed Debit Put Debit Spread 2 71DTE
(click to enlarge)
This is a standard balanced Iron Condor with an embedded put debit spread.  This put debit spread controls deltas and vegas in a market down move, which can delay downside adjustments.  A debit spread (put or call) can be added to any of the Iron Condor starting structures either initially or as an adjustment.  Also, the location of the debit spread does not only have to be ATM, but anywhere in the structure.  Backtest results for this structure have not been shown on this blog.  Details from the simulated trade above:
  • Reg T Margin / Max Risk:  $17,030
  • Max Theoretical Profit:       $2,970 - $1,970
  • Delta: -23.587
  • Theta: 44.358
  • Vega: -417.430

In the next post I will review some ETF Rotation Strategy findings, before returning to the Iron Condor dynamic exit posts.

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Iron Condor Summary Pages - New

I have added three new summary pages to this blog that can be accessed from the horizontal navigation/menu bar above.  The topics covered are:

Starting Structure Iron Condor Articles

Dynamic Exit Iron Condor Articles

Dynamic Exit Iron Condor Statistics
  • This page contains a downloadable Google Docs spreadsheet listing the summary statistics for the dynamic exit Iron Condors backtested on this blog.  This spreadsheet also contains yearly data for: returns, win rate, and profit factor.  
  • This page can be accessed from the menu above from:
    SPREADSHEETS -> Dynamic Exit IC Stats
  • Direct link: http://dtr-trading.blogspot.com/p/dynamic-exit-iron-condor-statistics.html
  • A screenshot of the spreadsheet is included below:
(click to enlarge)


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RUT Iron Condor - Dynamic Exit - 38 DTE Results Summary

Over the last eight posts we reviewed the backtest results for Iron Condors initiated at 38 days to expiration (DTE) on the Russell 2000 index (RUT).  To be consistent with all of the earlier backtests posted on this blog, we looked at 38 DTE Iron Condors initiated with short strikes at four different locations: 8 delta, 12 delta, 16 delta, and 20 delta.

For each of these four different short strike deltas, we tested three different starting structures, with six different dynamic exits.  These various combinations, resulted in 21 separate eight year tests for each delta when also including the three baseline (non-exited) tests.  Lastly, each eight year test contained 96 unique trades.

To review, the three Iron Condor starting structures were composed of 20 point wide credit spreads with short strikes at the specified delta mentioned above, and defined as:
  • Standard (STD): 10 put credit spreads, and 10 call credit spreads.
  • Delta Neutral (DN): 10 put credit spreads, and from 5 to 10 call credit spreads - the number is adjusted at trade initiation to create a delta neutral Iron Condor.
  • Extra Long Put (EL): 10 put credit spreads, 10 call credit spreads, and 1 extra long put.
The three categories of dynamic exit tested were:
  • ML40% - this is a Margin Loss % Exit.  Trades using this exit strategy either exit at 8 DTE OR if the trade has a loss greater than 40% of the margin requirement for the trade. (ML40% = Max Loss 40%)
  • BSP - this is a Price Movement Exit.  Trades using this exit strategy either exit at 8 DTE OR if the price of the underlying (RUT) moves below the strike of the short put.  (BSP = Below Short Put).
  • 0.6:0.6 - This is an Initial Credit % Loss/Profit Exit. Trades using this exit strategy either exit at 8 DTE OR if the trade has a loss of 60% of its initial credit OR if the trade has a profit of 60% of its initial credit.  This can also be viewed as a Risk:Reward ratio; risking 60% of the credit to make 60% of the credit.  A 0.7:0.9 variation would mean that the strategy is risking 70% to make 90%...taking a loss at 70% of the initial credit or taking a profit at 90% of the initial credit or exiting at 8 DTE if neither of the prior two criteria were satisfied.
The test results are summarized in the tables below. with one table for each of the four short strike deltas.  The "Strategy Variation" column uses the nomenclature listed above in order to distinguish between the different variations.

Iron Condor Dynamic Exit Statistics RUT 38 DTE 8 Delta
(click to enlarge)
For the 8 delta Iron Condor options strategy variations, the Sharpe Ratio was lowest for the variations that were not dynamically exited, but these also had high win rates.  You can also see the trend that the Initial Credit %Loss/Profit exits greatly reduced the "worst month" losses, with many of these losses only in the high teens.  This reduction in the "worst month" values came at the cost of a reduced the win rate.   The largest annualized monthly returns went to the STD-ML40% variation.


Iron Condor Dynamic Exit Statistics RUT 38 DTE 12 Delta
(click to enlarge)
None of the 12 delta Iron Condor variations had a Sharpe Ratio greater than 0.9.   The highest win rates and worst months went to the non-dynamically exited variations, and the ML40% and BSP variations...the same pattern we noticed in the 8 delta strategies.  The largest annualized monthly returns went to the STD-ML40% variation.


Iron Condor Dynamic Exit Statistics RUT 38 DTE 16 Delta
(click to enlarge)
With the 16 delta Iron Condor variations, the highest Sharpe Ratio was 0.8 and went to the DN-0.6:0.9 variation.  The 16 delta variations continued the same win rate and worst month pattern that we observed in the 8 and 12 delta variations.  The lowest worst month values were, in general, more than double the lowest worst month values for the 8 delta variations.  The largest annualized monthly returns went to the STD variation without a dynamic exit.


Iron Condor Dynamic Exit Statistics RUT 38 DTE 20 Delta
(click to enlarge)
The 20 delta Iron Condor variations have the lowest Sharpe Ratios of the four different short strike delta variations.  The highest Sharpe Ratio was 0.78 and went to the DN-0.6:0.6.  The largest annualized monthly returns went to the STD-0.6:0.9 variation.

Across all of the 38 DTE Iron Condor strategy variations, it is clear that the Risk:Reward exits have a significant positive impact on the "worst month" values.  It is also clear that the 2014 year was a loser for all of the 38 DTE variations.  Another observation is that being able to stomach a bigger loss (via no dynamic exit, or ML40%, or BSP), in general resulted in many of the higher annualized average returns.  If I was forced to trade one of these 38 DTE strategies "as is" with no adjustments, I would pick one of the 8 delta strategies using a risk:reward exit...these have summary statistics that are more agreeable to my way of trading.


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RUT Iron Condor - Dynamic Exit - 38 DTE - 20 Delta Continued

This post is a continuation of the prior post. In this post we will look at the backtest results for dynamic exits of 38 days-to-expiration (DTE) Iron Condors (IC), with 20 delta short strikes, with different profit and loss exits as a percentage of the initial credit.  Recall that these RUT ICs were all constructed with 20 point wide credit spreads.  This is a non-directional options trading strategy that seeks to profit from a market that stays within in a range between the two short strikes of the Iron Condor.

For some background on how these results are presented, please review the overview and prior 38 DTE posts at:

As discussed in the two overview posts, we will look at the same three Iron Condor starting structures that have been backtested on this blog: Standard (STD), Delta Neutral (DN), and Extra Long Put (EL).

In this post we will only look at the Initial Credit % Profit/Loss Exit on each of the three starting structures:
  • 0.6:0.9 - This is an Initial Credit % Profit/Loss Exit. Trades using this exit strategy either exit at 8 DTE OR if the trade has a profit of 90% of its initial credit OR if the trade has a loss of 60% of its initial credit.  This can also be thought of as risk:reward; risking 60% to make 90%.

This equity curve chart below is similar to the equity curves in my prior posts.  In the chart below, all of the STD Iron Condor versions have blue equity curves, all of the DN Iron Condor versions have green equity curves, and all of the EL Iron Condor versions have red equity curves.  The solid lines represent the equity curves for the "no touch" version, while the dashed lines represent the equity curves for the dynamically exited versions.


Iron Condor Dynamic Exit Equity Curves RUT 38 DTE 20 Delta Risk:Reward Versions
(click to enlarge)

The versions tested will close at either 8 DTE or a profit of 90% of the initial credit received.  The parameters that vary are the risk or loss amount.  The trades are closed for a loss if the loss is either 60%, 70%, or 80% of the initial credit received.  The Standard Iron Condor options trading strategy (STD) with the 0.6:0.9 exit had the highest overall return, but the STD strategy with no dynamic exit had very similar performance.  The STD-0.6:0.9 version closed at either 8 DTE, a profit of 90% of the initial credit received, or a loss of 60% of the initial credit received.

The results by year, for each of the 38 DTE, 20 delta short Iron Condor options trading strategy versions are shown in the table below.

Iron Condor Dynamic Exit Return Statistics RUT 38 DTE 20 Delta
(click to enlarge)

The details associated with each of the starting structure backtests can be found in the posts below:

In the next post I will summarize the dynamic exit results for the 38 DTE Iron Condor options trading strategy, and also show the associated trade statistics.

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RUT Iron Condor - Dynamic Exit - 38 DTE - 20 Delta

In this post we will look at the backtest results for dynamic exits of 38 days-to-expiration (DTE) Iron Condors (IC), with 20 delta short strikes, with different profit and loss exits.  This is a non-directional options trading strategy that seeks to profit from a market that stays within in a range between the two short strikes of the Iron Condor.

For some background on how these results are presented, please review the overview and prior 38 DTE posts at:

As discussed in the two overview posts, we will look at the same three Iron Condor starting structures that have been backtested on this blog: Standard (STD), Delta Neutral (DN), and Extra Long Put (EL).

Also as discussed in the two overview posts, we will look at three different exits on each of these three starting structures:
  • ML40% - this is a Margin Loss % Exit.  Trades using this exit strategy either exit at 8 DTE OR if the trade has a loss greater than 40% of the margin requirement for the trade. (ML40% = Max Loss 40%)
  • BSP - this is a Price Movement Exit.  Trades using this exit strategy either exit at 8 DTE OR if the price of the underlying (RUT) moves below the strike of the short put.  (BSP = Below Short Put).
  • 0.6:0.6 - This is an Initial Credit % Profit/Loss Exit. Trades using this exit strategy either exit at 8 DTE OR if the trade has a profit of 60% of its initial credit OR if the trade has a loss of 60% of its initial credit.  

This equity curve chart below is similar to the equity curves in my prior posts.  In the chart below, all of the STD Iron Condor versions have blue equity curves, all of the DN Iron Condor versions have green equity curves, and all of the EL Iron Condor versions have red equity curves.  The solid lines represent the equity curves for the "no touch" version, while the dashed lines represent the equity curves for the dynamically exited versions.


ron Condor Dynamic Exit Equity Curves RUT 38 DTE 20 Delta All Versions
(click to enlarge)

Again, the Standard Iron Condor options trading strategy (STD) without a dynamic exit yielded the highest overall return.  The second highest overall return was tied between the Delta Neutral Iron Condor options trading strategy DN-0.6:0.6 and STD-0.6:0.6.

The details associated with each of the starting structure backtests can be found in the posts below:

In the next post I will show the results for the 38 DTE, 20 delta short strike Iron Condor options trading strategy, with varying Initial Credit % Profit/Loss Exits.

If you don't want to miss my new blog posts, follow my blog either by email or by RSS feed.  Both options are free, and are available on the top of the right hand navigation column under the headings "Follow By Email" and "Subscribe To RSS Feed".  I follow blogs by RSS using Feedly, but any RSS reader will work.