In this segment, Tom and Tony discuss the Research Team’s work in back-testing dynamic Iron Condors for investors who trade in their IRA accounts.
Due to IRA restrictions, investors cannot sell Strangles in ETFs like SPY and IWM, but can trade them as dynamic Iron Condors. The Research Team compared selling dynamic iron condors on cash-settled indices (S&P 500 and Russell 2000) to see if they would be a more efficient use of capital for traders in IRA accounts.
For the Study, the Research Team back tested “Dynamic” Iron Condors by using the two Strangles that make up the trade; selling the 20 Delta Strangle and buying the 10 delta Strangle, in SPX, RUT, SPY, and IWM. They researched trades from 2005 to present and used the time frame of 45 DTE options. Finally, they managed all trades at 50% of max profit when possible.
Compared to the cheaper SPY contract, the Dynamic Iron Condors on the indices (SPX, RUT) historically returned higher average P/Ls with similar win rates relative to their Buying Power Reduction. However, average losers were larger because of the products’ size. As for Short Iron Condors in SPX and RUT, those trades have been have similar win rates to short strangles in SPY.
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