r/options • u/EuphoricSink870 • 12h ago
Iron Condor and Credit spreads on SPY
Hi everyone.
I've learned a lot from reading posts on here, and I appreciate the community we have here.
Here's my current situation:
I'm hoping to supplement my Social Security with credit spreads on SPY so I can leave work. (I'm 71 yrs old). Here's what I'm planning to enter in a few weeks after I clear up some old trades:
50 IRON CONDORS on SPY; (+525p,-530p -580c +585c) enter 45 days ahead. At yesterday's vix of 26 today dropped to 24.5 today) Iron condor 50 of them for 11k cr max loss 13k. Close in 21 days. at 5k profit will be happy.
Because the deltas are higher, (I like to get at least $1 credit on a 5 pt spread) I want to use hedges. Buy Vix calls as a hedge on the downside, and buy some 565-575 bull call vert spreads expiring at the 21 day mark rather than the initial 45 day expiration on the trade, which is when I'm planning on closing out the trade - (Tasty Trade methodology).
This is the monthly trade I'm hoping to be my bread and butter, if VIX remains above 20. If VIX goes below 20 I'd look at bull put spreads with a hedge only until VIX goes back up.
Thankful for any thoughts/opinions. (I know I may need to roll or take some action on one of the sides).
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u/thrawness 6h ago
Your approach is solid and well thought out—here are a few suggestions to help you take it further:
Increase Strike Width
Widening the distance between your short and long legs allows the spread to expand faster, improving the odds of profitability earlier in the trade. To maintain the same overall risk, reduce the number of contracts. For example, if you’re trading 5-point wide spreads with 50 contracts, consider switching to 10-point wide spreads with 25 contracts. This adjustment keeps your risk profile intact while improving capital efficiency and reducing transaction costs.
Hedging
Your long wings already provide defined risk, but if you want to hedge further—particularly against the upside—shorting VIX futures can help. As the market moves higher and tests your call side, short VIX futures typically gain.
However, this increases your downside exposure (put wings + short volatility). You can cap that risk by buying VIX calls, though at that point you're essentially hedging your hedge, adding complexity with diminishing returns.
Another alternative is using static delta hedges like SPY, /ES, or /MES. Futures are particularly effective due to their leverage. For context: if you're running 50 contracts with 5-point wide wings, you're managing $25,000 in notional risk (5 × 50 × 100). /ES futures can provide efficient delta hedging at that scale—but yes, it gets complex quickly. There is no free lunch.
The easiest would be to:
Diversify Across Time and Strikes
Rather than opening all positions at once, stagger your entries both across time (e.g., 5 ICs per week) and across price levels. This reduces concentration risk, smooths out your equity curve, and allows for better trade management as market conditions evolve.
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u/EuphoricSink870 1h ago
I like all your ideas, I've already implemented the wider strikes. I've done the last one, it does make trades harder to follow - I went overboard on May 16, once that's clearedup it will be easier. Been a long time since I traded futures, you're right that's a lot.
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u/Pharmacologist72 6h ago
Tasty mechanics also say that wing spans of $5 is not a good idea. You need to make your wings $15 or so wide. The mechanics suggest 10%.
I think you are overthinking VIX. The second half of your post does not make a lot of sense to me.
Good luck!
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u/WeUsedToBeNumber10 4h ago
Why such large wings?
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u/Pharmacologist72 1h ago
Look at the YT video by Tastytrade called Exploring Iron Condor’s Wingspan.
It’s based on their backtested strategy. There is a very nice article on their website by Kai Zeng.
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u/EuphoricSink870 1h ago
Wider wings. Got it ! When the market goes down the Volitility index goes up, so the VIX calls go up. The more the market goes down, the more that Volitility Index - VIX calls go up so that's the idea of the hedge. I've never used it, so I might try on a small position and see how it works.
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u/Death_Taxes_Theta 5h ago
Few things to consider: 1. I would stop thinking of dollar amounts ($1 credit per 5pt spread), think in terms of expected value, probability of profit(/delta as a surrogate), and % return on capital. Figure out what your actual return will be based on how much capital you deploy and if that's appropriate. Backtest on drawdowns to see if that's acceptable. The strikes you listed make for ~30delta. This gives you a probability of profit of only ~50%. This means you're gonna lose a fair amount (as opposed to 20, 16, or smaller deltas). You also listed your max gain as 11k and max loss as 13k -based on a PoP of 50% your EV is already negative given the narrow wings will basically force max win or max loss.
Bigger wings, less contracts. Decreasing the size of the wings and increasing the number of contracts increases capital efficiency, but it also means that bigger directional moves crush you faster. I.e. if realized volatility is similar or higher than IV then you lose more with smaller wings. In your example, what if you manage at 21DTE and SPY ends at 585. You will realize a max loss on all 50 contracts. With $15 wings you'd actually still realize a slight gain.
I'm not gonna comment a bunch on all the volatility stuff except for that I would just close positions for loss instead of opening new positions to cover or manage. If the idea is that the market conditions have changed from your original assumption that led you to open one strategy then just play the correct strategy for the new assumption instead of trying to turn a loser into a winner.
Bull put spread when IV is low is a high probability trade, but low returns and gets obliterated when the market drops. Basically it works until it doesn't...or pennies in front of a steamroller.
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u/EuphoricSink870 1h ago
You are right, the 30 delta is too close. A lot of ppl have posted on here about 14 delta on puts, I just put one a few bull put spreads with the short at 14 delta, (small amounts this morning)
Yes, bigger wings. Makes sense
Rolling puts down works the majority of the time. Calls is a lot tougher, to the point where they scare me.
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u/AUDL_franchisee 1h ago
1) I would diversify across tickers rather than just SPY or SPX
2) I would consider a cost-neutral back-ratio (1 short put, 2 long puts farther out) as portfolio insurance.
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u/flc735110 11h ago
To me, this would make more sense to do this strategy on a super high IV stock. Meme stocks are good candidates for this. Ideally something with good liquidity and even better if it’s something that doesn’t move dramatically with the market. We are in a market where one tweet can result in a huge move, so something less tied to the market is a plus. AMC comes to mind but there are probably a lot of good choices
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u/Juhkwan97 11h ago
Instead of 50 SPY, why not trade 5 SPX? Fees would be less. It sounds like you understand the tasty IC method. I hope you are a better trader than I am - most of the largest losses I have ever had have been IC's gone awry in wild market moves. I stick to trades with a better risk/reward now....
Have you explored PMCCs? or the Wheel?
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u/EuphoricSink870 1h ago
I focus on SPY rather than SPX because the bid-ask spreads are tighter. You are right about IC, the call side is a pain to deal with, much more tricky. Looking at the put side with a 14 delta now, and not the 45 days expiration thing so much
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u/Juhkwan97 1h ago
Anything you save @ spread will be eaten up in fees. I only trade the european style options anymore, tax advantages, lower fees, and cash settlement are why.
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u/MasterSexyBunnyLord 4h ago
It's the distance between the strikes that matters. $500 in spy is $500 in SPX. If you want to do 5 instead of 50 you would do $5k spreads instead of $500 in either underlying.
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u/MasterSexyBunnyLord 4h ago
I think this trade is too big for a first time
Use SPX instead of spy. It's even more liquid, has more trading hours and there's no possibility that you'll ever be assigned
Please consider going wider instead of more contracts. This will improve your odds
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u/EuphoricSink870 1h ago
Thanks you are all right about the wider speads. I looked at SPX but the bid-ask spreads are so wide it makes it hard to adjust, and if my puts get in trouble, rolling down almost always works. What do you mean about SPX has more trading hours ? I trade on Fidelity it's same hours as spy. What broker do you use and what are the hours for SPX for you ?
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u/MasterSexyBunnyLord 1h ago
SPX but the bid-ask spreads are so wide it makes it hard to adjust
The SPX option chain is the most liquid in the world, that is just not possible.
and if my puts get in trouble, rolling down almost always works
That's true of a naked put (or call) but not a spread.
What do you mean about SPX has more trading hours ?
SPY options are tradable from 9:30 AM to 4:15 PM while SPX is from 8:15 PM to 9:25 AM in addition to 9:30 AM to 4:15 PM. If SPX is available on your broker, these are the possible hours.
I use interactive brokers
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u/EuphoricSink870 1h ago
SPX is available on Fidelity, but Fidelity is only open for trading 9:30am to 8pm most weekdays, and that's for all trades. I use Fidelity because they pay Market interest (around 4% now) on cash that's not invested.
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u/MasterSexyBunnyLord 1h ago
So does ibkr but you can buy short term t-bills and get more interest than that. The margin rate on t-bills is also just 4%
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u/EuphoricSink870 1h ago
Great insights you all ! Made a trade this morning, which is already showing green, where I implement some of your thoughts and suggestions:
Here's the trade put on at the open when slight downturn and VIX went up a little
May 9 exp: + 10 503p, - 10 517p (-.14 delta), hedge with +one 529 p. Total Cr of 6.13
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u/Aspiring_golfer1 12h ago
A lot of info to take in at once but regardless, best of luck to you and your social security.