I have frequently described my days 'til expiry (DTE) "sweet spot" as 45 days with nonearnings plays and the same Friday of an earnings announcement or the Friday thereafter as the DTE for earnings plays.
Every so often, however, I like to look farther out in time, particularly where a nearer time setup doesn't provide what I'm looking for, which is usually at least a 1.00 credit/contract in the vast majority of setups. (In low volatility environments, I'm simply not a fan of calendars, debit spreads, diagonals and the like. I prefer to just dry powder out, wait for the next volatility wave, and enjoy the free time that these lulls in volatility provide).
Here's one setup (100 DTE+) that I look to put on as a background trade in SPY, IWM, QQQ, or DIA when volatility isn't that great in the market as a whole, the notion being that -- at least in broad market instruments like SPY -- volatility is a bit more "regular" or "average" farther out than nearer in time:
SPY 166/169/219/222 Iron Condor
POP%: 69%
Max Profit: $69/contract
BPE: ~$231/contract
BE's: 168.31/219.69
On the face of it, that isn't a very enticing setup -- $69 is the max, per contract profit and your theta decay's about .66 a day. But this isn't one of those setups that you just get filled and walk away from. Rather, you manage it intratrade, balancing delta when it's reasonably profitable to do so, rolling the put/call wings toward current price as time elapses and/or there is a pop in volatility such that premium becomes richer.
For example, I think it's a fairly high probability that we're not going to see 169 in SPY by March, so as time goes by and things become more certain, the 169/166 short put vertical side of the setup will decrease substantially in value (that's what you want as a premium seller) such that you can roll it up to higher strikes for an additional credit (ka-ching).
I do know traders who do these on a regular basis, but do one of two variations on intratrade management/delta balancing: (1) Do not roll the wings as a unit. Instead, roll the long options away from price if price moves toward them and the short options toward price if price moves away from them or (2) Don't touch the long options, only the short ones. In other words, roll the short call/put toward price when delta balancing, but leave the long options in place throughout the trade.
Personally, I don't like these particular variations, since you invariably end up with wings of oddball width which could cause problems in the event you have to roll. Moreover, when you widen the width between the short and long options in a spread, greater margin is required.
Even with my setup, however, there are drawbacks. If you enter a premium selling play during a period of low volatility and volatility increases, the premium in the options becomes richer and your setup can consequently go "under water"/in the red until volatility decreases. However, I generally deal with such volatility increases by rolling toward current price to take advantage of the richer premium intratrade -- that is, if I can do so profitably; it's not always possible, so sometimes you just have to wait until volatility recedes.
Another reason why you should always go small on any setup ... .
Every so often, however, I like to look farther out in time, particularly where a nearer time setup doesn't provide what I'm looking for, which is usually at least a 1.00 credit/contract in the vast majority of setups. (In low volatility environments, I'm simply not a fan of calendars, debit spreads, diagonals and the like. I prefer to just dry powder out, wait for the next volatility wave, and enjoy the free time that these lulls in volatility provide).
Here's one setup (100 DTE+) that I look to put on as a background trade in SPY, IWM, QQQ, or DIA when volatility isn't that great in the market as a whole, the notion being that -- at least in broad market instruments like SPY -- volatility is a bit more "regular" or "average" farther out than nearer in time:
SPY 166/169/219/222 Iron Condor
POP%: 69%
Max Profit: $69/contract
BPE: ~$231/contract
BE's: 168.31/219.69
On the face of it, that isn't a very enticing setup -- $69 is the max, per contract profit and your theta decay's about .66 a day. But this isn't one of those setups that you just get filled and walk away from. Rather, you manage it intratrade, balancing delta when it's reasonably profitable to do so, rolling the put/call wings toward current price as time elapses and/or there is a pop in volatility such that premium becomes richer.
For example, I think it's a fairly high probability that we're not going to see 169 in SPY by March, so as time goes by and things become more certain, the 169/166 short put vertical side of the setup will decrease substantially in value (that's what you want as a premium seller) such that you can roll it up to higher strikes for an additional credit (ka-ching).
I do know traders who do these on a regular basis, but do one of two variations on intratrade management/delta balancing: (1) Do not roll the wings as a unit. Instead, roll the long options away from price if price moves toward them and the short options toward price if price moves away from them or (2) Don't touch the long options, only the short ones. In other words, roll the short call/put toward price when delta balancing, but leave the long options in place throughout the trade.
Personally, I don't like these particular variations, since you invariably end up with wings of oddball width which could cause problems in the event you have to roll. Moreover, when you widen the width between the short and long options in a spread, greater margin is required.
Even with my setup, however, there are drawbacks. If you enter a premium selling play during a period of low volatility and volatility increases, the premium in the options becomes richer and your setup can consequently go "under water"/in the red until volatility decreases. However, I generally deal with such volatility increases by rolling toward current price to take advantage of the richer premium intratrade -- that is, if I can do so profitably; it's not always possible, so sometimes you just have to wait until volatility recedes.
Another reason why you should always go small on any setup ... .
