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If you bother or care to look up my post history I posted on thetagang about this strat already, but posting here this time to keep a log of sorts which I’ll update my positions on. (Don’t expect any big numbers, I have a small account < 10K)
The inverse iron condor strat:
So a regular iron condor is simple enough. An otm call credit spread and otm put credit spread for an initial credit, defined risk/reward, long theta, short Vega, delta neutral at start. The DTE is your choice, but I hear short dated is better because less uncertainty, which makes sense (you want the price to stay between your short strikes, and thus let the entire spread expire worthless). The other well-known strat is a reverse or long iron condor, which is an otm debit put and call spread, and this time it’s short theta, long Vega, delta neutral at start. This one you want the price to move drastically up or down.
With me so far? Congrats, you just got a short explanation on standard and reverse iron condors from yours truly.
So, what’s different with the inverse iron condor?
Simple, my problem was this: I hate entering a trade for a debit. And my thesis? Markets don’t stay the same in a longer period of time.
Solution: open a fully itm credit call/put spread for a net CREDIT, short theta, LONG Vega, delta neutral at start, and we want price to move drastically now. Give yourself a bit of time for market to move (95DTE approx), and bob’s your uncle.
But, you tell me, you’re really dumb. You could’ve just opened a credit condor using all calls or all puts for the same P/L outlook. Aren’t you even thinking about early assignment?
Why yes, dear reader. You are absolutely correct. Because of early assignment risk, I have decided this strategy is best for SPX which is European-style. As for the condor, I forgor 💀 (really, that’s the only reason. Do a regular credit condor if you want I’m not your mom).
So to sum up, buy fully ITM call and put spreads same expiry, same strike widths apart. Market dumps, you win. Market rallies, you win! Market flatlines, you lose.
If any one of you says this was done with chatGPT’s help, I will find you and stuff rocks up your butt hole.
For now here’s a screenshot of my SPY position that used the same strat, which I plan on exiting ASAP because I don’t want to mess around with early assignment risk.