0DTE Breakeven Iron Condor - How I trade it - 230412.pdf
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The document discusses John Einar Sandvand's 0dte breakeven iron condor trading strategy, emphasizing its market-neutral approach and the importance of risk management. Sandvand shares insights from his trading journey, including the mechanics of executing trades and his results over 2582 trades. The strategy is noted for its potential profitability, yet it requires close attention and can be time-consuming.
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0DTE Breakeven Iron Condor - How I trade it - 230412.pdf
- 1. Trading the 0DTE Breakeven Iron Condor John Einar Sandvand Online Traders’ Club Singapore April 12, 2023
- 2. Four points about the the strategy 2 My favorite strategy Market neutral Many, but small losses Consistently profitable… so far…
- 3. 3 My trading journey The 0DTE Breakeven Iron Condor Strategy - and the results How I trade the strategy The agenda
- 5. About me… 5 ● John Einar Sandvand ● 60 yrs old ● Lives in Norway ● Communications Manager in Schibsted ● Extensive background as a journalist, including 3 years in Asia
- 7. 2020: Too big risk caused huge losses 7
- 8. 2021: Finding my way 8
- 9. From May 2022: Growing my account 9
- 11. Me as a trader 11 I do not like big losses
- 12. Me as a trader 12 I do not like big losses I have no edge in predicting the market direction
- 13. Me as a trader 13 I do not like big losses I have no edge in predicting the market direction I am more disciplined with 0DTE than longer durations
- 14. Me as a trader 14 I do not like big losses I have no edge in predicting the market direction I am more disciplined with 0DTE than longer durations 0DTE Breakeven Iron Condor fits my personality and risk profile
- 15. Me as a trader 15 I do not like big losses I have no edge in predicting the market direction I am more disciplined with 0DTE than longer durations 0DTE Breakeven Iron Condor fits my personality and risk profile
- 16. Trading helps me learn more about myself 16 The rational John The emotional John
- 17. 2. The 0DTE Breakeven Iron Condor and my results
- 18. Two important terms to know 18 SPX ● Options on the S&P 500 index ● European style = cash settled. No risk of assignment ● Very liquid ● Daily expiries 0DTE ● = Zero Days To Expiration ● Options that expire the same day ● Has become tremendously popular
- 19. ╺ Combination of two credit spreads ╺ Sell an out of the money call - and buy a call further out ╺ Sell an out of the money put - and buy a put further out This is an Iron Condor 19
- 20. This is the 0DTE Breakeven Iron Condor 20 Sell a 0DTE Iron Condor at 5 - 10 delta - at multiple times during the day collecting equal premium on both sides Set stop loss on each spread at total premium + 0.05 Tighten stop losses as needed to manage the total risks of your positions and secure profits Change stop loss to only shorts during the last hour or when the long has no value All trades are on SPX - the option on the S&P 500 index
- 21. Have done 2582 trades over two years 21 The success of the strategy depends on keeping the average losses much smaller than the average wins In principle the average loss should be close to zero - hence the name Breakeven Iron Condor. In reality there will be some slippage, double stop losses, bad fills, etc. The average win has so far been 2.3 times the size of the average loss
- 22. The win rate has stayed very stable 22 40 % Based on 2582 trades
- 23. And so has the double stop losses 23 3.7 % Based on 2582 trades
- 24. Two measures for the profitability 24 Average return per trade 0.45 % Measured as percentage of the capital risked for the trade (buying power put up) Based on 2582 trades Premium Capture Rate 10.1 % Net profit as a percentage of the total premium collected
- 25. Results month by month 25
- 26. 3. How I trade the 0DTE Breakeven Iron Condor
- 27. I trade discretionary rather than mechanical ╺ Strict rules for stop losses ╺ But more flexible for other parts ╺ Not mechanical with set times and credit ╺ Others trade similar strategies more mechanical, for instance Tammy Chambless MEIC (Multiple Entries Iron Condors) ╺ The Facebook group TastyTrade Options is a good place to learn about different variations of the strategy 27
- 28. Many small trades throughout the day ╺ First trade usually a couple of minutes into the market ╺ At least 30 minutes between the trades ╺ Very careful during the last 30 minutes ╺ Sometimes up to 12-13 trades in a day - but never all open at the same time 28
- 29. The mechanics I use when entering ╺ Width of the legs: 25 - 35 ╺ Delta between 5 and 10 ╺ Typically collects between 100 and 200 for the whole IC ╺ Enter the full IC in one operation ╺ Try to wait for time when the price of SPX seems to flatten out 29
- 30. I ALWAYS set stop losses ╺ Stop losses set separately on each side ╺ I use a combination of stop limit and stop market orders using OCO (Once Cancels the Other) ╺ Stop loss 1: Stop limit order - with stop at total premium + 0.05 and limit 0.2 further out ╺ Stop loss 2: Stop market order set 0.15 further out from the limit price 30
- 31. The mechanics I use for exiting ╺ Main rule: Stop loss or close shorts at 0.05. Remaining longs can be reused later in the day. Will sometimes close positions early to ensure profit ╺ Will tighten stop losses quickly after theta decay to break-even point ╺ Stop losses will be adjusted throughout the day depending on total risk or to ensure profit 31
- 32. Managing total risk most important during the day ╺ Risk management determines how many positions I have on ╺ Always ask: What is the worst that can happen today with my current positions? ╺ The biggest enemy of the strategy: Sudden and large moves in the market ╺ If several stop losses hit already, I will often tighten up remaining stop losses or wait before putting on new trades ╺ Especially aware of possibility of double stop losses ╺ Will sometimes add a call or put credit spread to adjust the total delta ╺ Never risk more than 1-2 % of total capital on a single day 32
- 33. How I keep overview of the trades during the day 33 Combination of: ● Organizing trades into groups in Thinkorswim ● Continuously logging all trades in Excel - and greying out positions as the risk is removed ● Regular review of all positions and adjusting the stop losses
- 34. Some of the risks with the strategy ╺ Double stop losses. Has happened in 3.7 % of the trades ╺ Bad fills. Can happen if the stop limit order is skipped ╺ Both the stop limit and the stop market order trigger at the same time. Can sometimes make the trade profitable ╺ Market makes a sudden move before you have set your stop loss order 34
- 35. A great tool to use for monitoring is 0DTESPX.com 35 Developed by Iulian Constantin Constantinescu from the TastyTrade Options group
- 36. My most important learning: Keep a trading log ╺ Find a way to log all your trades ╺ I log: Strikes, strategy, premium, closing of positions, total risk, gross and net profit, and more ╺ Find your way: BUT LOG YOUR TRADES! 36
- 37. On the positive side ╺ Avoid the big losses ╺ Many seem to be able to make consistent profit in today’s market ╺ Different variations of the strategy depending on risk profile, etc. Summing up: Is this a strategy for you? On the negative side ╺ Time-consuming - with many trades throughout the day (night in Singapore) ╺ My style requires close attention to risk management ╺ You pay a lot in commissions (30 % of gross profits in my case) 37
- 38. Moving on: Two steps I want to take in my trading 38
- 39. Identify a set of 0DTE strategies that gives diversification 39
- 40. Start with backtesting of different strategies 40
- 41. Thanks! Any questions? You can find me at Sandvand.net Mail: [email protected] 41