About Short Iron Condors
A short iron condor is a multiple leg position that combines a bull put credit spread (buy a put and sell a higher strike put) and a bear call credit spread (sell a call and buy a higher strike call) where all strikes are equal distance and have the same expiration.
This position results in a net credit and max profit is realized if the underlying stock settles at or between the two short inside strikes at expiration.
Max risk is realized if the underlying settles below the lower long put or above the upper long call. This strategy has both limited profit and limited risk potential.
Example:
- Long 1 50 P @ .01
- Short 1 70 P @ .06
- Short 1 90 C @ .03
- Long 1 110 C @ .01
For the example above, you receive .05 for the 70/50 bull put spread and receive .02 for the 90/110 bear call spread.
Net credit on this iron condor is .07
Max profit is equal to the credit received .07
Max loss is equal to the difference between the spread's strike prices (strike differential) less the credit received. Here the max loss is 19.93 (20 - .07)
Max Profit
Max profit is incurred when the stock price is equal to or between the two short options at expiration. Max profit is equal to the net credit received (.07)
Max Loss
Max loss takes place if the underlying stock expires below the lower long put or above the higher long call. Take the strike differential minus the credit received (20 - .07 = 19.93)
Break Even Calculations
The upper BE is equal to the lower short call plus the net credit (90.07) and the lower BE is equal to the higher short put minus the net credit (69.93)
Both the profit and risk in this strategy are limited.
The screener results are initially sorted by descending "Probability."
Options information is delayed a minimum of 15 minutes, and is updated at least once every 15-minutes through-out the day. The screener displays probability calculations based on the delayed stock price at the time the strategy is updated. The new day's options data will start populating the screener at approximately 8:55a CT. Strikes that have not traded today are excluded from the results.
Main features of the Screener include:
- Ability to add various filters, with hundreds of different combinations.
- Save a Screener: When you've defined filters that you want to use again, save the screener.
- Load a Saved Screener: Select a previously saved set of Screener filters to view today's results.
- View the Results using Flipcharts: Page through charts of the underlying symbols on the results page.
- Download the Results: Download up to 1000 results to a .csv file. The Download will also pull all of the data fields present on the View you use.
- Automatic Screener Emails: This option is available for Barchart Premier Members. When you save a screener, you can opt to receive the top 10, 25, or 50 results via email along with an optional .csv file of the top 1000 results. Emails can be sent at Market Open (9:00am CT), Mid-Day (12:00pm CT), End-of-Day (4:45pm CT), and Overnight (3:00am CT) Monday through Friday.
Note: When selecting the Filter View for your Screener email, a filter must identify a specific search value in order for it to be included in the email.
Filters
Barchart Premier subscribers can add or modify different filters on the screener to find calls on the most favorable stock options.
Reordering Filters
Once filters are added, you may drag and drop them in the SET FILTERS tab to reorder the way they appear on the RESULTS tab (when using the Filters View). Each filter you add has the "Order" icon which is used to reposition it.
Deleting Filters
To remove a filter from your screener, click the checkbox to the left of the filter name, then click the red "Delete" button at the top of the column. You may also select all filters for deletion by clicking the checkbox at the top of the column, which selects ALL filters for deletion. You will be asked to confirm your decision to delete.
So you can focus on the best options, the screener starts by applying these default filters. Filter settings should be adjusted to match your trading requirements.
- Days to Expiration (monthly and weekly expirations) is between 0 and 60 days.
- Security Type is only Stocks.
- The Options Volume for Leg1, Leg2, Leg3 and Leg 4: for US market, must be greater than or equal to 100. For Canadian market, must be greater than or equal to 1.
- Open Interest for Leg1, Leg2, Leg3and Leg 4: for US market, must be greater than or equal to 500. For Canadian market, must be greater than or equal to 5.
- Ask Price Leg 1 and Leg 4 is greater than 0.05.
- Bid Price Leg 2 and Leg 3 is greater than 0.05.
- Moneyness Leg 2 and Leg 3 is up to -0.1%
In addition, the option must not be a "restricted" option (the option cannot be based on a split stock).
Note: Non-standard or "restricted options" (options quotes marked with an asterisk * after the strike price, and found on an individual symbol's options page) are automatically removed from the screener. A "restricted option" is typically created after spin-offs or mergers, and is not tradeable.
Probability Calculation
We take the underlying stock price (l), the target price (b), days to expiration (t) and the implied volatility (v) to calculate probability:
Probability Above = 1-NORMSDIST (LN(b / l) / (v*SQRT (t / 365)))
Probability Below = NORMSDIST (LN (b / l) / (v*SQRT(t / 365)))
b = target price
l = underlying last price
v = implied volatility
t = days to expiration
Short Condor Break Even: Probability of the underlying trading inside of the break even points at expiration.
Short Condor Max Risk: Probability of the underlying expiring below the lowest put strike at expiration or above the highest call strike.
Views
The Results page contains three standard views. You may switch the view using the links at the top of the screener results table. The Main View shows the Volume and Open Interest for each option, while the Dividend & Earnings View can be used to highlight strategies with upcoming dividends and earnings. The Filter view shows you the data contained in the field(s) you've added to the screener.
A checkbox is provided on all Views to "Show Strategy Description" in the view. The Strategy Description can be helpful in breaking down how the options strategy was built. Example of a Short Iron Condor description:
SIC_11/18/22_145.00_25.00
where:
- SIC = strategy
- 11/18/22 = expiration date
- 145.00 = Leg 1 strike
- 25.00 = Strike Differential (difference between each leg: Leg1, Leg2, Leg3 and Leg4)
Main View
- Stock Symbol - the underlying equity. Clicking on the symbol will take you to the current quote page.
- Price~ - the last price of the underlying symbol
- Exp Date - the expiration date of the option
- Leg1 Strike - the strike price of the leg1 option
- Leg1 Ask - the ask price of the leg1 option
- Leg2 Strike - the strike price of the leg2 option
- Leg2 Bid - the bid price of the leg2 option
- Leg 3 Strike - the strike price of the leg3 option
- Leg3 Bid - the bid price of the leg3 option
- Leg4 Strike - the strike price of the leg4 option
- Leg4 Ask - the ask price of the leg4 option
- BE+ - the upper limit necessary for the strategy to break even. The upper BE is equal to the lower long call plus the net debit.
- BE- - the lower limit necessary for the strategy to break even. The lower BE is equal to the long put minus the net debit.
- Max Profit - Max Profit = Net Credit. the potential maximum profit of this strategy. Max profit is incurred when the stock price settles below the lower short put or above the higher short call.
- Max Loss - Max Loss = Strike Differential - Net Credit. The maximum loss that the strategy may return. Max loss takes place if the stock price is equal to or between the two short options at expiration.
- Avg IV - the average implied volatility of the calls and puts immediately above and below the underlying price.
- Risk/Reward% - (spread differential - net credit) / net credit
- Break Even Probability - the likelihood of the strategy breaking even. (See calculation below)
Dividend & Earnings View
- Dividend - the dividend the equity pays on the Ex-Dividend Date. On the morning of the Dividend Ex-Date, the stock's price is lowered by the amount of the dividend that was just paid.
- Dividend Ex-Date - the first day on which the stock trades without the dividend. If you wish to receive the dividend, you must own the stock by the close of market on the day before the Dividend Ex-Date. Many times, a covered call is exercised early so the buyer can own the stock and collect the dividend. This typically happens to ITM options the day before the Dividend Ex-Date.
- Earnings Date - The date on which a company is expected to release their next earnings report. The prices are more volatile, which tends to inflate the prices of the near-the-money strikes. During a contract period when there is an earnings report due, the earnings announcement can dramatically shift the range in which the stock has been trading.
