Iron Condor Trading Strategy Video

Trading Strategy Videos

In this segment of our Algorithmic Trading Strategy videos, we provide an Iron Condor Video Tutorial of the Iron Condor Trading Strategy. This ES Weekly Options Strategy can be traded alone – or as part of a portfolio of trading strategies as seen in the S&P Crusher Portfolio.

Trading futures involves substantial risk of loss and is not appropriate for all investors. Past performance is not necessarily indicative of futures results.

Results discussed in this video are based on back-tested models that have certain inherent limitations. Unlike the results shown in an actual performance record, these results do not represent actual trading. Also, because these trades have not actually been executed, these results may have under-or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated or hypothetical trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to these being shown. This strategy utilizes Iron Condors – which introduces additional back-testing difficulties.  Estimates are used in the back-tested model for premium collected which are based on the value of the VIX at the time the trade was placed and the number of days till expiration. In addition, ES Weekly Options were not available to trade throughout the entire back-tested period.

Iron Condor Trading Strategy

Video Transcript Follows: In this video, I’m going to be talking about one of our trading strategies called the Iron Condor, it trades the S&P weekly options by selling an ES Weekly call, and also selling an ES Weekly put, and then we also buy a deeper out-of-money call, and put, to protect us against a big move against the position. So I’m just going to be doing an overview of the Iron Condor trading strategy, and keep in mind that it’s used in the S&P Crusher v2, but it can also be traded as a standalone strategy if somebody wanted to only trade options and place the Iron Condor trades.  I’m going to be going over the details of it, I’ll be doing a real quick options primer for those of you that aren’t really familiar with options, and then we’ll look at a few of the trade examples, and then talk about how this strategy fits into the portfolios that use it. So with that in mind, let’s get on to the disclaimer.

First, I would like to go over our disclaimer. We are not registered with the CFTC as a commodity trading advisor. We’re what’s called a third-party developer, we create algorithms and we license them for use on a personal computer through TradeStation, and they can also be auto-executed through NFA-registered brokers. Keep in mind that trading futures and options involves substantial risk of loss, these algorithms are really not for everyone, they should be traded with risk capital only, in our opinion, and lastly, the data that we show, unless otherwise noted, is based on hypothetical back-tested models, and it does have certain limitations, per the disclaimer here, so feel free to read this, you can pause the video and read it more carefully. The last comment I’ll make is that the data is for educational purposes only. Again, because we’re not registered, we do not control client accounts, and also, I guess I should mention that because we’re not registered, the data that we show has not been audited by any government agencies, so just keep all that in mind as we go through the data in this video, we’re going to be talking about performance, again, that’s based on hypothetical back-tested models, it does have limitations. At times, we do mention the live returns on the website, or in the video, and when we do, that is from live data, and we note it as such. When we do that, just, again, keep in mind that past performance is not indicative of future results, and again, trading futures does involve risk of loss, and it’s not for everyone.

Options Trading 101

So first, I’d like to do a real quick options primer. So with options, there’s different kinds of options. You have call options, which gives the buyer the right to buy the underlying asset, and the put options gives the right to the buyer to sell them, to sell the underlying asset. The strike price is just the price at which the underlying asset is to be bought or sold when the option’s exercised. The expiration date is just when the option expires, so every option has an expiration date, and then the premium is the amount of, it’s basically the cost of the option. So it’s the amount of money that the seller of the option collects when they sell it, and that’s what the buyer pays when they buy it. There’s a lot more to options than just this, but I wanted to at least kind of go over these terms. So keep in mind that when you sell an option, or when you buy one, the more volatile that the market is, the higher the premium will be, in general, and the more time ’til expiration it’ll also affect the premium, and make it more expensive, because basically, there’s more time for the asset to reach the strike price and go beyond it. One thing I haven’t really mentioned here is that you can also buy in-the-money options and out-of-money options. So an in-the-money option would be, for example, let’s say Apple was trading at $100, and you wanted to buy a call at $95, or at $95 strike price. Well, that option would be in the money by five points already, because it’s already at $100, and the strike price is $95, so the value of the option would be the amount that it’s in the money, which is five points plus whatever time value the option still has, and in that case, if the option expired in a month, then there’d probably be a pretty big time value on it, but if it was expiring in a week, it’d be a lot smaller. So then, in that same example, if somebody had the same example, so Apple’s trading at $100, and they thought that Apple would go above $100, maybe to $105 or beyond, then they might buy a call option at $105 strike price. And in that case, the value of the option would not have any in-the-money value, and so it would purely be based on the time value of the option, because if Apple just traded sideways, then that option would expire worthless, but if it went above that, then it would close in the money by however many points it closed above $105. So that’s just a basic overview of options, and if you are new to options, I recommend you can just kind of look online and Google it, and there’s a ton of videos that just talk about kind of the basics of options.

Options on Futures

Okay, so I was just talking about Apple stock, but what I’d like to do is show you the options on futures, because options do trade on futures just like they do on stocks. Some of you might be familiar with the SPY ETF, which is the S&P 500 ETF. The Emini S&Ps trade very similar to that ETF, so if we pulled up a chart of the SPY ETF, it would look very similar to this. But what you’re looking at here is a chart that I just took a picture of from the S&P Emini’s, this is a 10-minute candle. This is actually the Iron Condor trade that we’re in now, but I don’t want you to focus on that for now, because we’re just talking about just options on futures in general. But there are a lot of different kinds, they have different expiration dates, monthly, quarterly, weekly. What we do is the weekly, and so the OEW4, the W4 just represents the fourth week of the month, and those expire in two days on November 25th. So here’s a bid ask of the options, the calls, and the puts for the S&P Emini’s that expire in two days. So right now, when I took this picture, the S&P’s trading at 2,199.25, and so, if somebody wanted to buy a put at, say, 2,195, which would be kind of right in here, then you could look right here to see how much that put would cost. So the 2,195 put is trading at 3.15 by 3.35, and this is an S&P point, so the way you figure out how many dollars that is is you multiply it by 50. So if we thought the market was going to tank, we could buy a put at 2,195, and hope that by Friday’s expiration in two days, that the S&P would close below that, and if it did, then we’d be profitable, as long as it went below 2,195 minus the premium that it cost us, so it would have to really close at about 2,192 for us to actually be profitable, and then anything below 2,192 would be profit, so if it closed at 2,188, it’d be four points of profit, or about $200. Now, what we do, though, is we sell the options. With the Iron Condor strategy, we sell a call and sell a put, so just keep that in mind as well. But generally speaking, the more volatility, and the more time ’til expiration, the more expensive the option is. On this chart here, if you’re wondering what this bottom chart is, this is actually the VIX, and so I wanted to have it here just so you can kind of see what the VIX was at at the time that I took this picture, so that you could reference kind of what these numbers are, but you’ll see that the more deeper out of money the put is, the cheaper it is, and it gets to a point, because the volatility’s relatively low, and these options expire in two days, some of the puts are actually really cheap, so like the 2,185 is only 1.25, so someone could buy that for about $63, and if it moved below 2,185, it would be a pretty nice gain for them. Alright, so now what I’d like to do is look at an example of, I believe it’s a call option a little bit deeper. ‘Kay, so let’s look at this a little bit closer now, so these are the same pictures, I just kind of dragged them over so that we could focus in on the call side. So right now, the S&P’s trading at 2,199.25. The five-point out-of-money call option’s trading at 2.30 by 2.45, and each point is $50. So again, if someone bought the 2,205, call right now at the ask, they’d be paying $50 times 2.45. And the 2,205 call would be kind of right up in here, and the buyer of that option would be expecting the market to rally in the next two days before it expires. So they’d pay $122, and they’d be long a call option at 2,205. Now, if somebody thought the market was going lower, and they didn’t want to buy puts, then they could sell that option at the bid, and they would collect 2.3 points times 50, which is $115, and they’d be short the 2,205 call option. And that’s actually what we did in our current trade, which is an Iron Condor, and so we sold the 2,205 call, and we also sold the, which one was it, I believe the 2,195 put. So let’s keep going, though, and I’ll show you kind of the examples on Friday. So if by Friday, in two days, the ES closes above the strike price of 2,205, then the option would be profitable. So for example, if it closed at 2,210, the option would be worth five points, ’cause the strike price was 2,205, and so that’s about $250. So their profit would be $250 minus what they paid for the option, or about $127. And if by Friday the ES closed below that strike price of 2,205, then the option would expire worthless, and the seller would keep the premium they collected.

Iron Condor Trading Strategy

Now what I’d like to do is talk about the Iron Condor strategy. With the Iron Condor strategy that we use, what we’re doing is, at 3:50 p.m. Eastern, 10 minutes before the equity markets close, we can initiate the trade, and that’s only Monday through Thursday, so if we’re not in the trade and Friday comes, we’re not going to initiate an Iron Condor, because we would have to do it for the next week, and we prefer not to be in any option positions over the weekend. So it utilizes the ES weekly options, which means they have a short expiration period, so if we initiated on Monday, then that trade expires on Friday. And we place one trade per week maximum, so we don’t do multiple Iron Condor trades, we only do one per week, so once it triggers, it’s not going to trigger again for that week. This trade has a very high per-trade back-tested win rate, and it does well in up and sideways moving markets, and I’ll talk about that more a little bit later. ‘Kay, so what I want to do now, though, is go into an example of the previous Iron Condor trade that we had. So what you’re looking at here is a picture of the trade station platform, with the most recent Iron Condor trade that we placed that has actually closed. So we’re actually in an Iron Condor trade now, and that’s this one right here, but it still has a couple days before that trade is over, so let’s look at this one that was from the 15th of November. So this is a 10-minute candle of the S&P, this is Monday right here, Tuesday, Wednesday, Thursday, and then Friday, and this little line here just shows when we got into the trade, we didn’t actually buy the futures here, what we did is we use this as a tracker, what we’re doing, though, is we sold the call, and we sold the put. But this just tells us, it just kind of shows us where the option expired, at this dotted line here. Now, in this example, we sold the 2,175 call, and the 2,145 put. And as you can see, so what we’re expecting is that the S&P would close between these two lines, so kind of somewhere in between here and here. And you’ll notice that it actually closed above our call, and that makes this a good example, because I can talk about the more interesting cases where it closes either above our call or below our put. But let me pull back the, let me go back to this slide, though, because this picture here’s the same one that we were looking at. On Monday afternoon, at 3:50, our Iron Condor strategy placed the trade. The ES was trading at 2,159 when we placed the trade, so when we placed it, the ES was kind of right in here, which is, you can’t really see it, but that’s 2,160, so it was at 2,159. We short (or sell) one call option and one put option, which created a bracket that we expect the ES to close between. The short call option we sold at 2,175 strike, and we collected 4.5 points in premium, or about $225. The short put option was trading at 2,145 and we collected 6.5 points, which is about 325, so when we initiated this trade, we collected $225 for the call, and $325 for the put, or about $550. But we also bought a deeper out-of-money call and a deeper out-of-money put as a protection to limit the losses in case we were wrong. ‘Kay, and let me talk about that real quick, so if the protection that we buy, really what it’s doing is we buy a really deep out-of-money call, which in this example, I want to say it was about 50 points above here, somewhere, somewhere up in here is where it was. But what we do is we buy a very cheap call, and a very cheap put, so we’re looking to buy it for only $12, so one that’s trading at one tick. However, if there’s a lot of volatility, and the option trading at one tick is more than 100 points away from our entry, then we will default to the strike price that’s 100 points away, and pay more for it. But if it’s only trading at 0.25, then it’s going to be somewhere between the call or put that we sold, and 100 points, so that’s our protection. So what that does is if, let’s say the market just rallies huge, like way above our call price, then eventually, it might get above the long call that we have, and if that happens, then it creates kind of a maximum loss, because we are short a call, but then we’re also long a call, and so it creates a maximum loss for us, so that our losses aren’t unlimited if it moves really strongly against us. Now, in the back-testing, we only saw that happen about, I think it was only three times in all the trades that were placed, so it’s pretty rare that that would happen, but it could happen, and if it does, then we do have protection to limit the losses. That’s not to say our losses still can’t be big, because if it closes between our short call and our long call, then we’ll take losses, and the further away from the call that we’re short, the larger the losses are, and then the flip side is true on the put. ‘Kay, so let me go back to this slide here, so I can talk about how this trade ended up. So on Friday, the ES closed at 2,179.75, that’s right in here, which means the put option we sold expired worthless, so that’s good, so this put that we sold here, because the S&P closed above it, that one was 100% profitable, so we kept the $325. The call option, though, expired in the money by 4.75 points. Since we collected 4 1/2 points when we sold it, our loss was what we collected minus what the option is worth, so 4.5 minus 4.75, which equals negative 0.25, which equals negative $12. Which is really basically like a flat trade, even though it closed above our strike by about five points, it still was pretty much a break-even trade, and that’s because when we sold it, we collected 4.5 points. So what that really means is that there’s the main bracket that we want the S&P to close in, and if it closes between our call and our strike, then we keep all the premium, and we would’ve kept the $325 plus the, what was it, the $225. So we would’ve kept all of that if it closed in between here. If it closes above our call, there’s kind of another line that is the call plus the premium we collect, and if it closes in between those, then the call is partially profitable. And the same is true on the put. If the put, so for example, this 2,175 call, since we collected 4.5 points, that means that for us to have taken a loss on that trade, it would’ve had to have closed above 2,179.5. And in this example, it did, it closed at 2,179.75, so we took a small loss. The long call and long put protection was $35 for the put, and $15 for the call, and the commission is $10 per option, so the total profit for this trade was $325 for the short put, for this trade here, that’s $325, minus $12.50 for the short call, so the call side of it took a loss of $12.5, minus $40 for commission, and then minus $35 for the put protection, and then minus $15 for the call protection. So it’s a total gain of $225.50. And so, so even though we were wrong, this trade was still profitable, and that’s one of the really good things about selling options, is that it gives you, it gives you a decent amount of margin for error. Because we’re selling out-of-money calls and out-of-money puts, number one, the market has to move past our strike price, and then number two, it has to move not only past our strike price, but past the premium we collect as well. So that gives us kind of a small buffer beyond the strike price, and then if it closes beyond that kind of second buffer, like this trade did, then we do take more losses on the trade, in fact, for every point above that buffer, it’s a $50 loss. But the good thing about Iron Condors is it leads to one leg of the Iron Condor will always be profitable, since the S&P can’t close both above our call and below our strike, it’s impossible for it to close above our call and also below our strike, so that means that one leg will always be 100% profitable. And so really what that does is it gives us a even bigger buffer for the entire trade. So like in this example, we collected 6.5 points for the put, and 4.5 points for the call, so if you add those together, that’s 11 points, and so if you’re looking at the call side, like if the market rallies, how much does it have to really rally before we take a loss for the entire trade. It’s really the strike price plus the premium for the call, plus the premium for the put. So in this example, it would’ve had to have closed above 2,175 plus 11 points, which would be 2,186. So that really does give us a pretty big buffer, and I think it’s one reason why Iron Condors are so appealing, because when this algorithm triggers, we actually do have a small edge to the upside when it triggers, because it’s very closely-related to the bull fire, or the momentum algorithm that we have, and so we really are expecting the market to kind of drift higher, but of course, if it drifts higher, then it has to drift higher by quite a bit to get above our call, and be at a loss. And if we’re wrong, and it goes lower or sideways, then we have kind of this full profit zone. And then if we’re really wrong and it sells off, then we still have that kind of 11-point buffer on the put as well, so if the put is 2,145, then for the entire trade to be at a loss, it would have to close at 2,145 minus 11, so 2,134. And so that’s probably the biggest advantage, is we collect not only premium from the put, but also the call. ‘Cause as I was saying, with this algorithm, it does actually have a bias to the upside, meaning, the algorithm does think that the market will kind of drift higher, so originally, when we looked at this, what I looked at was just selling the puts, and I coded it up, I ran it through our proprietary options analysis tool that estimates premium, and gives estimates for how these trades would work out in the back testing. And I was kind of surprised when I added the call side of it as well and realized that even though we have a bias to the upside for that week, it’s not a strong-enough bias to go above the call, and so it became pretty clear that the right way to do this was to do the Iron Condor instead of just selling the put. Because it lets us collect, basically, twice the premium, you collect premium from the put, and then also the call. So that’s kind of the big advantages, basically, we don’t have to be right 100% of the time in order to be profitable. Our expectation of the trade was for the market to move sideways, or kind of drift higher, and it actually did, even closing above our call, but we were still profitable, so it gives a really big margin for error, so if the market goes up, we can be profitable as long as it doesn’t go up by too much, and then as long as it either goes sideways or goes down within a range, then it’s also going to be a profitable trade.

Back-testing An Options Algorithm

Okay, so now I’d like to talk about the disadvantages of the Iron Condor trade. In my opinion, the number one disadvantage to the Iron Condor strategy that we use is that it relies heavily on back-testing. And back-testing the options algorithm is extra difficult, because you have to use estimates for premium collected, so the way we did that is we used a look-up table for estimating premium based on the VIX at the time the trade would’ve been placed, and let me kind of go back to this chart, and I’ll try to explain a little bit better what I mean. So if you look at this chart here, this is, again, this is the S&P 500 with the Iron Condor algorithm applied to it. And you can see, I don’t know, this is November in 2014 when in the back-test scene, we would’ve placed an Iron Condor trade on the 17th, which would’ve been a Monday, so here’s Tuesday, Wednesday, Thursday, and then Friday, and you can see on this example, it was kind of similar to the one we just looked at, where the market went sideways, or drifted higher, and then ended up closing above the strike price of 1,990, and it actually closed above it by seven points, which isn’t horrible, in fact, this trade more than likely would’ve still probably been profitable, because of the premium collected on the call, plus the premium on the put would’ve put the kind of losses zone probably somewhere in here. In fact, the VIX, yeah, the VIX was trading at similar levels, actually a little bit higher than what it was on the other trade that we had that was similar to this, so the buffer on that trade was 11 points, so I assume the buffer on this one would’ve been another 11 points. But the point of showing you this is to kind of, it’s basically to say that we, in the end, we don’t know how much premium would’ve been collected on this trade, and so we have to use estimates. And so that’s the number one disadvantage, is that we use estimates when figuring out how much premium we would’ve collected. And so again, we used a look-up table that is based on what the VIX is trading at the time the trade would’ve been placed. The day of the week the option was placed, so if it was a Monday, then we assume more premium, and if it was a Thursday, then we assume a much smaller amount of premium. And then whether the option is a call or a put, because generally speaking, the puts are more expensive than the calls when this algorithm is triggering. That’s not always the case, but usually, when this algorithm triggers, that would’ve been the case in our opinion, because the market would’ve been kind of drifting higher, and so usually in those cases, the puts are a little bit more, ’cause everybody is kind of expecting the market to sell off. Okay, and then the other issue with back-testing options is that the weekly options on the S&P were not available through the entire back-tested period. I believe they became available about three or four years ago, and so, in our back-testing, we go all the way back to 2003, and so, we are back-testing something that would not have been around to trade, but we do that to show what we think, how we think the options would’ve done if they had weekly options back then, and we use that so that we can get a more accurate picture of how we think the options will do moving forward. But just remember that back-testing has limitations for all the disclaimers we have all over the place and that we talk about at the start of the video, but options algorithms have an extra layer of difficulty, and an extra disclaimer just because we’re estimating premium. Now, we did use as pessimistic model that I could that would still be realistic, and we kind of go back and check that model versus what we see in live trades as well, to make sure that we’re not doing any overestimating. But I guess the good news with Iron Condors, or back-testing the options, is that there are things that we do know, I mean, we know what the price of the ES was at the time the trade was placed, and we have a really good estimate of what the final expiration of the ES would’ve been on Friday. And so with that data, I was able to basically, using this look-up table, analyze multiple different strike prices to see what I thought would be the best for this algorithm, ’cause what I’m saying is that the way we pick how much out of the money the call and put is, was really a whole ‘nother layer of analysis. We looked at, what if we sold basically at the money call and then at the money put, we would’ve collected more premium, and so maybe that does better than selling these out-of-money call and out-of-money puts. And then what if it’s a little bit staggered to where the call is deeper out of money than the put is? And you’ll see, even on these charts, that the bracket sizes actually change, so it’s not always 20 points out of the money on the call and 20 points out of the money on the put, it really depends on what the VIX is, how far until expiration, and those are the primary things, but in the analysis, I looked at all these different combinations of even using in-the-money calls and in-the-money puts, and what we have here is what we settled on in the end, based on all that analysis.

Iron Condor With Weekly Options

Okay, so with that done, what I’d like to do now is talk about how the options algorithm fits into kind of the different portfolios that we offer with algorithmic trading. Alright, so this graphic is probably familiar to most of you, ’cause we use it in the other videos, but it really just shows how each strategy does based on what the S&P does. So we basically broke down each month in the back-testing into thirds, so that we could create kind of three different categories to define what the S&P’s doing. The up market condition is the S&P gains 30 points or more, the sideways is it loses between four points or gains up to 30 points, and the down is the S&P closes down by four points or more for the month. And what this data shows is that the Iron Condor does really well in sideways-moving markets, and also up-moving markets. When I originally designed this algorithm, it really was to try to help out in the sideways-moving market, conditions that we saw, and so I was real pleased to see that it does, that it averages $1,097 per contract traded per month, when it’s a sideways-moving market. I was a little bit surprised to see that it also does good, in fact, it does better in the up-moving market conditions, and I think that can be explained probably two different ways. One is, during these up-market conditions, this algorithm will trade every week, because the market will be kind of drifting higher, moving higher, and the momentum algorithm will be triggering, and that means that this one more than likely will be as well, and so as the market kind of starts moving higher, this algorithm triggers, and so it trades more often. In sideways conditions, it could be that the market goes kind of up for a little while, then sideways, then down, but then closes within a range, and so this Iron Condor might not trade as much, but it doesn’t really matter, because it does the best of all seven algorithms in the sideways condition. In fact, I think the second-best is the covered calls, and the Iron Condor does twice as good, so it definitely is an algorithm that we expect to do well based on the back-testing and with all the disclaimers that we have all over the place and everywhere on the website and in the videos, and I talk about ’em a lot, with all those disclaimers, we do think that this algorithm will do good in sideways conditions, and then also the up conditions, as the back-tested data shows. And I think, when you think of an entire portfolio of these, all seven strategies, then that would basically just be adding all seven of these, and when you do that, even though it does take losses on average in the down months, the other algorithms kind of make up for those losses, and then some, to where, if someone’s trading the S&P Crusher, for example, which uses this Iron Condor strategy, then they’re not only trading the Iron Condor, they’re trading all these other ones as well, and again, our design methodology is to design algorithms for each market condition, and then overlay them on top of each other to create a good average for each market condition. That would be as opposed to creating one strategy, or even two strategies that attempt to do well in all market conditions, ’cause again, not to rant on that, but my opinion is, in order to create a strategy that does really good in all market conditions, it usually means, in my opinion, that it could be more susceptible to over-optimization that people have to add multiple indicators in order to do that, and then that just makes that algorithm a little more questionable, in my opinion, so instead of doing that, we create relatively straightforward and simple algorithms that all trade together, and they all have positive expectations for certain conditions.

Iron Condor Trading System

OKay, so I think the last thing I want to do is just go to the website and show you the product page for the Iron Condor, so if you go to the website and you go up here to Iron Condor, you will see all of the data that we have on the Iron Condor package. You’ll see this kind of product dashboard, which highlights some of the key metrics on this algorithm. Because this one can be traded standalone, really, all the strategies can be traded alone, so someone could only trade this algorithm if they wanted to. That’s what this per $10,000 traded represents, because in order to do an Iron Condor trade, you need to have about $10,000 as a starting account size. Now, the account can actually go below that once you’ve started, and you can still trade it, because it really only requires, I believe, one ES overnight margin, which is about $5,000, but the $10,000 gives you kind of an idea of what we think is good for the, per units traded. I think the $10,000 is actually a pretty aggressive number, to where something more like $15,000 or $20,000 would be another way to allocate this, but if you’re using the $10,000, then the average gain per year back-tested, again, all the disclaimers, is about 87% per year, or about $8,717. And then we break that down into the monthly, you’ll see the monthly win rate is pretty high, 76%, that means that, if you look at all the months that were back-tested from October 2003 to October 2016, 76% of the months are profitable when you add up all the wins for each month, then it’s about 76%. Total number of trades is 916, and that’s actually on a per-leg basis, so to get the total number of Iron Condor trades, you would divide this by two, but it’s basically 916 call and put trades were made. Now, one thing to keep in mind is that trades with a 5% loss or bigger, and that 5% is based on the $10,000, so that’d be a $500 loss, is 84, so it’s actually it actually has, of all the trades, about 9% of them had losses of $500 or more. Now, the per-trade win rate is pretty high, it’s 80%, roughly, so that means that if we just round it to, say, 80%, that means 80% of the trades are profitable, 9% of them have a loss of $500 or more, and then the other kind of 11% are losses between zero and $500. And then the portfolios that this trades in, the S&P Crusher v2 is the only portfolio that the Iron Condor trades in, the day trader doesn’t, because it does day trades only, the ES/TY futures doesn’t as well, and then the bearish trader doesn’t, and the reason why the bearish trader doesn’t is because the Iron Condor trade doesn’t do quite as well in down-moving markets, and the bearish trader was a portfolio we put together to kind of focus on down-moving markets. But you also see all the back-testing information, the worst percent draw-down closing trade to closing trade per $10,000 traded is about 53%. Now, that is a high number, which means that at one point in the back-testing, there would’ve been a $5,300 loss in there, in a string of trades, more than likely, and this is kind of the period that it was seen. This also shows the commission that we use for the option trades, and the protection used in the ES reports in the trade list reports we have. But one thing on this draw-down to keep in mind is that, well, number one, that draw-down is based on the back-testing, and it is possible to have your losses could be incurred, but the other thing I want to say is that, just remember that if you’re looking at using one of our portfolios, like the S&P Crusher, then this draw-down doesn’t have as much meaning, because this is just one algorithm being traded among the seven, and on a $30,000 account, about a $5,000 loss, or string of losses that would’ve been seen from the options, some of those losses would’ve more than likely been offset by some of the more bearish trades that we make, and so this is only for if you traded this strategy alone with $10,000, then that’s the draw-down that we saw in the back-testing. And we just mentioned the algorithms traded, and then the account requirements again, $10,000 is the minimum. But we’re not allowed to give recommendations, but, so this isn’t advice to any specific person, just more in general that if someone is looking at trading this strategy alone, something more on the order of one unit per 20,000 might be a little bit better, because then that draw-down becomes only a 25% draw-down with the $5,000 draw-down. Then if we scroll down, you’ll just see the hypothetical account, monthly P/L, and this just takes each month’s P/L from the hypothetical account, and again, this is only trading the Iron Condor, so this isn’t the Crusher, this is just the Iron Condor. And you’ll see in November, the Iron Condor’s done pretty good so far. And then the last thing, and probably what might be more interesting to people, this is the trade list, so we update this every day, and you’ll see, here’s the trade that we were analyzing in the video, where we sold the call at 2,175, collected 4.5 points, sold the put at a 2,145 strike, and collected 6 1/2, here’s where expiration on Friday was, this is the commission we paid, this is the cost of the protection, and again, the protection is the long call and the long put, and then this is the trade profit loss, which this P/L doesn’t include the protection or the commission, but when you look at the hypothetical account balance, it does add those in, so the account went from $131,897, after these two trades were done, it was up to $132,120, which is about a $223 gain, which is what we kind of showed in the slide. So I think for the most part, that’s all I had. Just to summarize what we’ve done, so I kind of reviewed just a primer on options, we talked about the Iron Condor, its advantages, its disadvantages, I walked you through a few trades, we talked about the difficulty with back-testing, because we have to estimate the premium collected, and I showed you the product page, where we have the back-tested stats in a format that can be kind of easily digested, so I think that’s it, but if you have any questions at all, give us a call, you can email us, we can give you a live demo, where we’ll, either myself or one of the other guys will walk you through all the trades plays, we’ll show you kind of more details about how the algorithms work.

But overall, the Iron Condor is a really good strategy, in my opinion, it is best traded as part of a portfolio, like the S&P Crusher, because it helps out a lot in the sideways-moving markets, and also the up-moving markets. And then it doesn’t lose a lot in down-moving markets, to where the other algorithms that are kind of wired towards bearish market conditions can kind of take over, and do really well, hopefully. But again, I’ll just end with trading options and futures, and futures and options, it does involve substantial risk of loss, it’s not appropriate for everyone, we always take the opinion that, just generally speaking, it should only be traded with risk capital, that is, money that you can kind of afford to lose. Nobody likes to lose any money at all, but it’s money that is kind of slated for more alternative investments, like a quant/algorithmic trading system. With that, I think I’ll sign off, and look forward to talking to you again in some other videos. Have a great day, and don’t hesitate to reach out to us if you have any questions at all. provides trading algorithms based on a computerized system, which is also available for use on a personal computer. All customers receive the same signals within any given algorithm package. All advice is impersonal and not tailored to any specific individual's unique situation., and its principles, are not required to register with the NFA as a CTA and are publicly claiming this exemption. Information posted online or distributed through email has NOT been reviewed by any government agencies — this includes but is not limited to back-tested reports, statements and any other marketing materials. Carefully consider this prior to purchasing our algorithms. For more information on the exemption we are claiming, please visit the NFA website: If you are in need of professional advice unique to your situation, please consult with a licensed broker/CTA.

DISCLAIMER: Commodity Futures Trading Commission Futures trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this website or on any reports. The past performance of any trading system or methodology is not necessarily indicative of future results.


With the exception of the statements posted from live accounts on Tradestation and/or Gain Capital, all results, graphs and claims made on this website and in any video blogs and/or newsletter emails are from the result of back-testing our algorithms during the dates indicated. These results are not from live accounts trading our algorithms. They are from hypothetical accounts which have limitations (see CFTC RULE 4.14 below and Hypothetical performance disclaimer above). Actual results do vary given that simulated results could under — or over — compensate the impact of certain market factors. Furthermore, our algorithms use back-testing to generate trade lists and reports which does have the benefit of hind-sight. While back-tested results might have spectacular returns, once slippage, commission and licensing fees are taken into account, actual returns will vary. Posted maximum draw downs are measured on a closing month to closing month basis. Furthermore, they are based on back-tested data (refer to limitations of back-testing below). Actual draw downs could exceed these levels when traded on live accounts.

CFTC RULE 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under — or over — compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown.

Statements posted from our actual customers trading the algorithms (algos) include slippage and commission. Statements posted are not fully audited or verified and should be considered as customer testimonials. Individual results do vary. They are real statements from real people trading our algorithms on auto-pilot and as far as we know, do NOT include any discretionary trades. Tradelists posted on this site also include slippage and commission.

This strictly is for demonstration/educational purposes. does not make buy, sell or hold recommendations. Unique experiences and past performances do not guarantee future results. You should speak with your CTA or financial representative, broker dealer, or financial analyst to ensure that the software/strategy that you utilize is suitable for your investment profile before trading in a live brokerage account. All advice and/or suggestions given here are intended for running automated software in simulation mode only. Trading futures is not for everyone and does carry a high level of risk., nor any of its principles, is NOT registered as an investment advisor. All advice given is impersonal and not tailored to any specific individual.

* Published percentage per month is based on back-tested results (see limitations on back-testing above) using the corresponding package. This includes reasonable slippage and commission. This does NOT include fees we charge for licensing the algorithms which varies based on account size. Refer to our license agreement for full risk disclosure.