Monthly Income Strategy - What do you think?

[Strategist]

What has vol got to do with condor. Higher vol will give higher prices. No?

Low volatility is a slow moving market. Higher prices means the market will also move faster and need more adjustments.

 

[aces27]

The concept looks very interesting.
To have an Iron Condor at all times and not let the Nifty slip out of it.

1. Does the profit outweigh the transactional costs (brokerage/slippage/taxes).
2. Is this the best combination +/- 200 , 500.
What would be a better range for lets says 2-3% profit , but increased likelihood of staying profitable. How about +/- 300,500
3. I understand the highest rate of decay of time value is during the last few days only.
As in CreditSpreads the core of the profit is from the TimeValue - will this be effective during the first few days of the month. TimeValue lost in market (gained by us) should be more than the transactional cost.

Improvement :
1. This should be automated , if postive results - we can try to control slippage
2. Please share data and tools used for back testing - let us try other combinations
I dont think volatility is a major issue , as you are buying and selling simultaneously. We have to consider other transnational costs. Not sure about slippage.

 

[aces27]

This is fundamentally a good concept. Iron Condors are proven. And we are not letting it breach ever.

1. As OP had requested , experienced members please share their thoughts. I am unable to find any negatives in this.
2. Can you guide the impact of choosing different strike prices , what would be the impact on profit and probability.
I was considering - +/- 2.8% for trigger - approx 230 points. Not 100 - as that would be too frequent and lot of unnecessary transactions.
And Condor Upper/Lower Breakeven points - at +/- 4% - Fairly away (a Large Condor) - to be safe.
Is is better to choose - 1.5% trigger and 3% Condor breakeven distance ?

Looking forward to the replies.
Apart from a Gap Up - I dont think there can be any loss in this. Please confirm.

 

[AmeliaEarhart2]

Aces 27,

Thanks for your kind reply. I am testing this on paper-trading. I need help -


a) Do you know any software to backtest it?
b) How can a small player like myself "automate" it?

Thanks

Amy

 

[aces27]

I can help you with the automating part.
I shall start working on it, once I have a clear algorithm.

Can you provide historical data , if sorted and relevant to this , that we can simulate on that.
Conceptually what is your take on the strike prices ,
How large should the band be.
And were you able to get opinions from other experienced members here or elsewhere. Cause seemingly there is no possible scope for a loss in this. As we never let the Nifty escape the IronCondor. And chances of a GapUp can be taken.

PrivateMessage me also , please , I am looking at taking this forward more systematically.

 

[aces27]

I have been able to test , with EOD data.
Hence , had to use a larger trigger range - +/- 2.4% - (approx 200 points) for Nifty at 8000.
Time value ,as known , starts to decline rapidly only in the last few days.
I wonder if it is better to use , 100 points as trigger.

Automating wont be a problem , but is the payoff better - in comparison to number of transactions increasing. I dont have historical intra day data to simulate this. Hence not sure if I was getting the best OptionPremiums as well - since only EOD price available.