New eBook short: Iron Condor Spread Strategies (FT Press)

Tue, May 24, 2011 | Jared Woodard

Books, Options Education

I’ve just published a new eBook short with FT Press, titled Iron Condor Spread Strategies: Timing, Structuring, and Managing Profitable Options Trades. As regular readers know, we’ve published a newsletter and strategy for investors since 2007 trading iron condors and other market-neutral positions, and this essay builds on that experience. I’m particularly proud of two aspects of the text:

  1. Few traders apply rigorous delta-hedging regimes in conjunction with condor positions, and even fewer authors discuss them. But: not me! I assume you know what deltas are and explain and apply one such hedging regime.
  2. This is the only text anywhere that presents backtested results for iron condor trading strategies (that I know of). Because there is no commercially available software that can perform this sort of work, backtesting options strategies (something we do on a bespoke basis for clients) is challenging and time-intensive work. In the book, I look at several variations on a basic iron condor strategy and discuss the resulting equity curves.

Two things I don’t do are explain the very basics of what an iron condor is or how or why you might delta-hedge a position. One Amazon reader seemed kind of upset by this. One reason I skipped those topics is that they have been discussed to death already elsewhere (including onĀ this blog); another reason is that, given the publisher-imposed word count (~4500 words), I’d much rather cover material others haven’t than merely explain old concepts to novices. If you’re a regular reader of this blog, nothing in the ebook will be unfamiliar.

One conclusion I hope people start to warm up to is that the “always on,” constant-exposure approach was a relic of an earlier period of market history. There are still guys hawking newsletters today where, for $20 or so, they’ll put you into a far-OTM condor with no rationale, month after month. It is now possible for ordinary traders to analyze volatility and develop quantifiably successful strategies, so there’s no excuse for walking down blind alleys when it comes to strategy selection.

The text is available as a downloadable PDF from FT Press. For those with ebook readers, it’s available at Amazon, BN.com, and the Apple iBookstore. And check out Options and the Volatility Risk Premium if you haven’t already.


4 Comments For This Post

  1. Tom Says:

    Hi Jared –

    Read your book. Enjoy your clear, crisp prose. Is there an easy way (e.g., TOS code) to calculate the percentile rank of historical volatility?

    Thanks.

    Tom

  2. Jared Says:

    Tom, thanks for your kind words. I don’t know of any TOS studies that do this. It is very easy to do in Excel.

  3. Owen Says:

    I know there’s a free Excel spreadsheet you can get from a guy named “Peter Hoadley” that will calculate the Historical Volatility for you. It has limited functionality compared to what the TOS platform offers, but it might help.

  4. John Billingsly Says:

    Hi, do you discuss Calendar Options as well?

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Jared Woodard specializes in trading volatility as an asset class. With over a decade of experience trading options and other volatility products ... Read More

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