Selling a weekly Iron Condor strategy with cryptocurrencies involves creating a combination of options positions that generate a net credit. The Iron Condor is a popular strategy in options trading that involves selling two credit spreads simultaneously, a call credit spread and a put credit spread, with the same expiration date.
For the past few weeks, I have been playing out with the idea of selling weekly iron condors on crypto, to test my ideas in life I've been selling delta >0.2 iron condors with Ethereum on the Deribit platform. Despite I still have my fears that trades could go out of control, the results so far look promising.
An iron condor is an options strategy consisting of two puts (one long and one short) and two calls (one long and one short), and four strike prices, all with the same expiration date. The iron condor earns the maximum profit when the underlying asset closes between the middle strike prices at expiration. In other words, the goal is to profit from low volatility in the underlying asset.
This is not trading advice. Investments in stocks, funds, bonds, or cryptos are risk investments and you could lose some or all of your money. Do your due diligence before investing in any kind of asset.
Now, back to the topic - how to sell weekly iron condor strategy on crypto
For trading crypto options, I'm using the deribit trading platform and trade exclusively weekly options every Friday.
I prefer trading Ethereum, but that doesn't matter much, you could trade Bitcoin too.
When entering trade I look for deltas to be under 0.2, but for the call and put side. I'm ok with deltas 0.16 or 0.12. I try to avoid Delta 0.2 or delta 0.21, even if the premium seems more. Better safe than sorry.
Here is an example trade:
On March 10th, 2023 ETH price $1,530
I could sell the following iron condor with a March 17th, 2023 expiry
- Sell 1 Call 1650 @ 0.0055 (Delta 0.16)
- Buy 1 Call 1850 @ 0.001 (Delta 0.02)
- Sell 1 Put 1400 @ 0.0055 (Delta -0.13)
- Buy 1 Put 1200 @ 0.001 (Delta -0.02)
Total premium: 0.009 ETH / 13.50
That would give us $150 wide iron condor, and as long as the ETH price would stay between 1650 and 1400, we would realize our max profit of 0.009 ETH.
Also for constructing such an Iron condor, we would be required just 0.2 ETH locked in the margin. as at the moment each short contract on the deribit platform requires 0.1 ETH collateral
In theory with 1 ETH coin, you could open up to 10 contacts (5 on each side), but that would lock all your eth as collateral and there wouldn't be room for an error. In the case of 1 ETH, I wouldn't recommend opening more than 6-8 contracts (60-80%)
If you feel insecure, don't trade more than 1 contract at a time. scale it up with time, but never go more than 80% from your margin.
Using the above example and 10 contracts (5 iron condors), we could already potentially earn about 0.09 ETH / 140 USD per week.
At the time of writing, I'm trading 3 iron condors with collateral of about 0.8 ETH, which I'm gradually looking to increase to 1 ETH using both the income from the closed options trades and depositing some additional ETH.
My aim is to let all trades expire worthless, and so far it has worked very well so, but also I do understand that there might be a week I will need to adjust my trades, as there might be a market crash or explosive market bull run.
I'm not worried so much about bull runs, it seems easier to make income in the upward-going market. I'm always worried about market crashes.
When trading Iron condors with Ethereum I tend to look at 100-150$ wide spread. That gives enough premium and also limits the potential risks
For my trades I allocate up to 80% trade capital, Much safer would be some 60- 50% to leave some room for error. Never go with 90% or 100%, the chance you will blow up is just too high.
It's quite possible to collect enough premiums to have about 1.5-3% weekly return. But also there is always a chance you will need to adjust your trades.
Entering trades is quite easy, monitoring and adjusting takes time and practice.
Keep in mind that options trading involves risks, and it's important to understand the mechanics of the Iron Condor strategy and the risks involved before placing the trade. It's also recommended to start with a small position size until you become more comfortable with the strategy.
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