Steady Condors Strategy
What Is Steady Condors?
Steady Condors looks like a variation of Iron Condors, but is closely managed by the Greeks. It was inspired by the Weirdor trade strategy. Anyone who has traded non-directional iron condors knows they can be extremely challenging in a trending market, potentially causing a lot of stress and large drawdowns.
Our forum discussions are dedicated to your understanding the when, why and at what price for each trade so you don’t stress or blow up your account. They aren't the Holy Grail, but no single strategy ever is.
It is relatively easy to make money with high probability condors 9-10 months per year when the markets are range bound. But many condor traders give back most or all of their profits during the usual 2-3 losing months each year because they lack a detailed plan for options risk management.
- Hedged non-directional trades managed by Greeks
- Tailored for mid term traders
- 2-3 trades per month plus adjustments
- Targets 20-25% per year on the whole account
- ~0.3%/month commission impact
- $20K+ portfolios
Our Iron Condors strategy alternative produced 13.5% CAGR (compounded annual growth rate) since inception.
“I would have had a great year if it wasn’t for one or two months.” If you trade condors without a detailed risk management plan you will eventually experience large losses. Since our trading strategies naturally have a high expected monthly win rate, our options risk management objective is to avoid giving back much more than one month’s average earnings during our losing months.
Our manage-by-the-Greeks philosophy is designed to take advantage of the volatility skew that naturally exists in index options like RUT and SPX and to deal with the inherent flaws this creates for traditional condors. We all know that the market “takes the stairs up and the elevator down” and this is built into index options pricing. For condors, this means that you will be able to sell much farther OTM puts than calls for the equivalent premium.
This causes a traditional iron condor to naturally set up short Delta. If the market makes a move up after trade launch you will start to lose money immediately even with declining implied volatility typically helping your short Vega position. Therefore, we normally only use enough call credit spreads to balance our setup.
Steady Condors is built to trade in units of $20,000. Our preferred vehicles are index products such as RUT and SPX which means no liquidity issues and no upper limits for allocated capital. Steady Condors can be traded in both IRA’s and margin accounts.
Read full description here.
Why We Are Different?
We respect the downside risk of a condor. “Rolling” adjustments isn't really an immediate risk reducing technique if the market continues to fall and implied volatility continues to rise. When things get ugly, you need adjustments that have some punch behind them to significantly cut your risk.
How we address those issues?
First, we use long puts and debit spreads at trade setup and as adjustments instead of rolling our threatened options. This helps reduce the Vega and Gamma so as price moves down and volatility moves up.
To flatten the T+0 curve on the up side, we sell fewer call credit spreads. This limits upside risk from the beginning of the trade and it’s easy to manage.
If the market is moving up, we take the calls off at predefined adjustment points.It doesn’t hurt the profit potential too much and also eliminates the upside risk.
Those steps helped keep our drawdowns reasonable, relative to realized and expected returns.
We emphasize options education in a dedicated forum where the strategy is discussed in great details.
Please note that we report returns on the whole account (not return on margin).