SPY Iron Condor

## SPY Iron Condor — Full Methodology

### Volatility Setup

1. **IV Rank:** SPY IV Rank must be above 30 (options are relatively expensive — good for sellers)

2. **VIX filter:** VIX between 18 and 30 (elevated but not crisis-level volatility)

3. **Range expectation:** SPY's expected move (from options pricing) defines the strike selection

### Trade Construction

1. **Sell the call spread:** Sell call at +1σ expected move, buy call 5 points higher

2. **Sell the put spread:** Sell put at -1σ expected move, buy put 5 points lower

3. **Expiration:** 30–45 DTE (optimal theta decay curve)

4. **Credit target:** Collect ≥ 33% of the spread width in premium

### Exit Rules

- **Profit target:** Close at 50% of max profit (don't get greedy near expiration)

- **Loss limit:** Close if the position reaches 2× the credit received in loss

- **Adjustment:** If SPY breaches one of the short strikes, roll the untested side closer to collect more premium

- **Time stop:** Close at 21 DTE if neither profit target nor loss limit is hit

### Position Sizing

- Max risk per trade: 3% of portfolio (defined by spread width minus credit)

- Run 1–2 iron condors per month on SPY

- Never have more than 5% of portfolio in SPY options at once

### Best Market Conditions

Works best in range-bound, moderately volatile markets. The ideal environment is VIX 20–28 with SPY oscillating within a 5% range. Underperforms during trending markets (strong rallies or selloffs) where one side of the condor is breached.

### Backtest Notes

Tested on SPY options chain data from Jan 2019 to Dec 2024 (monthly cycles). Credit and debit modeled at mid-price with 0.02 slippage per leg. The 50% profit-take rule significantly improved risk-adjusted returns vs holding to expiration.