low prob condors look for:
30 days out
enough volatility (20-30% vols) to take some premium
trades in pennys, tight bid/ask
take a 16-20 delta in the calls and puts should give you approx. 1 standard deviation for a low prob condor with 30 days till exp. To figure out prob of success take the short put delta plus short call delta then subtract from 100.
can adjust bias up or down by shorting a higher delta on one side over the other
Scale out or tighten the noose when taking or protecting profits at around 10-15%, not willing to go back to zero, goal is to make 10 to 20% a month on these.
On loosing side, take a % of your contracts off at -10% of margin another portion at -15% and the rest at -20%. Limit losses to approx -15% of buying power reduction/margin. Idea is to not get bumped out of your trade. You can figure the adjustments quickly by taking the credit recieved minus the distance btwn strikes X the % loss. (ex. 3 credit on a 10 point spread = 7 margin) take 15% of 7 equals 1.00 So if your condor is trading then at 4 you are at a 15% total loss. Can't be taking big losses on these Condors since your winning trades are not yeilding high %. .For this trade may want to trade something like the IWM instead of the RUT b/c 1 RUT is equal to 10 IWM. You will be able to do the scaling with the IWM with less capital.
Double Calendars:
Criteria:
stocks over 70
generally under 32 vol, more stability
Plan:
max loss 25%
take profits at 20% tighten the noose, start taking off some of your contracts, may be able to milk up to 40-50%
keep your profit and loss similar
Calendars are more dosile than credit spreads
Adjustment process for 40 day double calendar:
1st 20 days
keep it simple make adjustment point at short strike and half way to expiration b/e
2nd 20 days
between half way to your b/e to your b/e at expiration.
example if GOOG goes to the upside of your call side 710 strike b/e point 740 so:
The first 20 days in the trade will adjust this btwn 710 and 725.
In the 2nd 20 days will adjust btwn 725 and 740.
Will be rolling 1/2 of your put calendar contracts up to approx. where the stock is. This will cut the deltas down.
Need a plan when you will adjust these calendars. If you start to get too much short deltas as price goes up when you adjust this you will be cutting down the negative deltas.
A good way to tweak and play with the calendar spreads is to check the pricing of the front month calendar. For example the FEB/MAR Goog dbl calendar is trading at 17.7 the JAN/FEB (front month calendar at the same strikes) is trading for twice the value. This means that in 30 days you can be up 100% if goog stays still. You can also tweak the stock price and see the dollar move the postion can withstand in 30 days. For this example the stock can move 50-60 points up/down to b/e
VIPES when looking at double calendars in stocks:
V volatility need vols in lower 1/4 or 1/3 of 6-12 month range
I industry stay away from wacky biotechs etc.
P price chart look at the chart basics and see what it has done in the last week, month and 3 months in regards to large moves...
E earnings short shouldn't be in earnings month
S skew btwn IV in months.
In the world of an iron condor ut is landing in the middle of the shorts you are making a bold straight forward front month bet on price. The world of Double Calendars is making the same front month bet but with a cushion beyond the shorts. You spend more money up front and risk more with dbl cal. than condors. but b/c you pay more you have the potential to make more, 1 to 1.5 times of what your paying on the trade.
