Iron Condors

Short iron condor (structure)

Sell 1 OTM put and 1 OTM call; buy 1 farther OTM put and 1 farther OTM call; same expiry; net credit, limited risk

Profit driver

Time decay plus unchanged or falling IV; profit is highest when price stays between the short strikes

Max profit

Net credit collected (per share) times 100, realized if price finishes between the short strikes at expiration

Max loss

(Wing width - credit) * 100, realized if price finishes beyond either long strike

Breakevens

Lower BE = short put strike - credit; Upper BE = short call strike + credit

Credit vs probability tradeoff

More credit usually means shorts closer to ATM (higher delta) and higher breach risk; less credit means farther OTM (lower delta) and higher win rate

Implied volatility (IV)

Market-implied annualized uncertainty backed out from option prices; a pricing input, not a realized fact

Realized volatility (RV)

Backward-looking annualized volatility from the underlying’s returns; a historical estimate of how much price actually moved

RV calculation

Daily log returns r = ln(Pt

Pt-1); RV = stdev(r over N days) * sqrt(252)

This app’s IV source

IB historical data field OPTIONIMPLIEDVOLATILITY for the underlying; analysis uses that time series, not a user-selected strike

IV percentile (meaning)

Where today’s IV sits versus a lookback distribution; 0.80 means higher than 80 percent of prior observations

IV percentile (computed here)

Rolling 252-day percentile rank of the IV series itself (not SPY price)

Entry gate 1 (IV percentile)

Prefer selling premium when IV percentile is high so you are paid more and mean reversion is more likely to help

Entry gate 2 (IV - RV)

Prefer IV - RV meaningfully positive to avoid selling options when implied is not rich versus recent realized

DTE selection (25-45 logic)

Shorter DTE increases gamma risk (faster P&L swings); longer DTE increases vega exposure (more IV sensitivity)

IV vs RV (trading meaning quiz)

IV reflects what options are priced for (risk premium included); RV reflects what actually happened recently; for short premium, IV meaningfully above RV suggests you are more likely being compensated for selling volatility risk (not guaranteed)

Delta (what it controls)

Short strike delta is a proxy for moneyness and breach probability; lower absolute delta places shorts farther OTM

Delta targets

Choose short deltas (e.g., 0.10-0.20) to balance credit vs breach risk; target net delta near 0 to avoid directionality

Theta target

Prefer net theta positive so time passing helps expected P

Delta | Gamma | Theta | Vega | Rho

Delta = option price sensitivity to underlying price; Gamma = sensitivity of delta to underlying price; Theta = sensitivity of option price to time (time decay); Vega = sensitivity of option price to implied volatility; Rho = sensitivity of option price to interest rates/

IV vs RV (definition quiz)

Implied volatility (IV) = market-implied annualized uncertainty backed out from option prices; Realized volatility (RV) = backward-looking annualized volatility computed from historical underlying return

Vega target

Condors are net vega negative; avoid very large negative vega magnitude to limit losses in IV spikes

Liquidity and fills

Require tight bid-ask spreads and adequate size; conservative pricing (sell at bid, buy at ask) reduces false edges from mid-prices

Forward 30d IV (definition)

Future 30-day average of the same historical IV series, created by 30-day rolling mean shifted forward in time

Slope < 1 (interpretation)

Regression flatter than y=x implies mean reversion: high current IV tends to be followed by lower future IV and low current IV by higher future IV

Vol_diff vs current IV

vol_diff = forward IV - current IV; negative values imply IV tended to fall over the next month (tailwind for short vega); regimes show behavior differs in low vs high IV

SPY exercise style risk

SPY options are American-style; early assignment risk exists (notably around dividends for short calls), requiring operational management