Quick question – on your non-front
month condors, what range days from expiration do you look to enter them? Are
you in the 60-90 range, or do you look further out?
As I've mentioned many times, I'm not a fan of trading front-month positions. The time decay is nice, but the negative gamma is just too large for my comfort zone. This is not something to debate. Higher risk and higher reward go together and I prefer less of each. I recognize that the majority of iron condor traders prefer the 'action' involved with trading front-month options.
In general, I enter new iron condor positions as soon as I exit my previous positions. When open positions move from 2nd month to front-month due to the passage of an expiration date, is when I prefer to close the trades.
Occasionally I hold positions into expiration week. I'm not going to force trades. If a front-month position is comfortable to hold and if I am not willing to pay the required cost to exit, then I hold. But I'm often willing to pay up, just to remove the risk of holding.
The primary reason or timing my entry point in this manner is that's when margin becomes available. Thus, my plan is
not based on number of days. I trade when I can. NOTE: I don't want to leave the impression that I use all available margin. It's important to maintain margin for making adjustments. But, I have a self-imposed margin limit and I don't want to exceed that limit.
I'm usually in no hurry to open new positions, and tend to trade about 20% of my
planned size at one time. If prices are attractive, I'll begin with 40%. When IV expands, I collect better prices
for the balance of the position. If RUT changes price, I find myself owning
positions with different strikes. When IV contracts, I'm forced to settle for
a bit less than the original trade. If nothing appeals to me, I'll sit on the sidelines with smaller positions.
My trade plan does not specify anything about time to expiration, other than to concentrate on 2nd and 3rd month options. When IV is especially low, I avoid the 3-month spreads and trade only 2-month. When IV is high, I trade 4-month spreads, if
they are available. Rationale: to sell extra vega.
I hope that answers your question. It's just my style, but it makes me comfortable with my trades.
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