Iron Condor

Iron condors involve selling spreads which require margin. TFSAs don't allow margin trading. The short put spread and short call spread each create potential obligations that require margin backing. You need a margin account with Level 3 options approval.

An iron condor has separate short strikes (short put below stock price, short call above), creating a wide profit zone. An iron butterfly has the same short strike for both put and call (ATM), creating maximum profit at one price point but collecting more premium. Condors are more forgiving; butterflies are higher risk/reward.

Maximum loss is the width of the wider spread minus the credit received, multiplied by 100. For example: $5 spread width - $1.50 credit = $3.50 max loss × 100 = $350 per iron condor. This occurs if the stock goes beyond either long strike at expiration.

Generally no. Close at 50% profit or at 21 DTE, whichever comes first. Holding to expiration increases gamma risk - small stock moves can quickly turn winners into losers. The final 10-20% of profit isn't worth the risk. Also, holding through expiration can trigger assignment.

If the stock reaches your short strike, your position is being 'tested.' You're not at max loss yet, but you're at risk. Options: (1) Close the position, (2) Roll the tested side further away for credit, (3) Close the untested side and manage as a single spread. Don't wait until it's beyond the short strike.

Expected move = Stock Price × IV × √(DTE/365). For $85 stock, 25% IV, 45 DTE: $85 × 0.25 × √(45/365) = $7.47. Place short strikes beyond this expected move for a 1 standard deviation setup. Adjust wider for more conservative positioning.

Not necessarily. If you have a slight directional bias, you can create an asymmetric iron condor with the short strike closer on the side you expect less movement. For example, if slightly bullish, put the short put closer to current price than the short call. This increases credit on one side but accepts more risk there.

Limit to 5 concurrent positions maximum, with no more than 15% of your account allocated to iron condors. Each position should risk no more than 3% of your portfolio. Remember that all iron condors are hurt by volatility spikes, so they have correlated risk.

Adjust if: (1) more than 21 DTE remaining, (2) you can roll for a credit, (3) you still believe stock will mean-revert. Close if: (1) less than 21 DTE, (2) rolling requires a debit, (3) stock has clearly broken out of range, (4) loss is approaching 2x credit. Don't over-adjust - sometimes closing is the right answer.

Partially. IV crush after earnings or events helps because you're short vega. However, if the stock moved significantly toward a short strike, the directional loss (delta/gamma) often exceeds the vega gain. IV crush helps most when the stock stays centered - then you benefit from both theta and vega.

Calculate portfolio vega by summing vega across all positions. Set a limit (e.g., portfolio vega shouldn't exceed X% of account value in P&L per 1% vol move). Monitor VIX for spikes. Consider hedging with long VIX calls or reducing exposure when aggregate vega becomes too large. Diversification by expiration helps spread vega risk.

Roll early (at short strike touch, not breach) when > 21 DTE remains. Roll out in time AND away in strikes if possible. Only roll for credit - if you can't get credit, close instead. Limit to one roll per side per trade. After rolling, treat it as a new position with new exit rules. Track roll costs separately to evaluate if rolling adds value to your system.

Calculate IV Rank and compare to recent realized volatility (HV20 or HV30). Enter when IV > HV by a meaningful margin (this is the 'variance risk premium'). Track this metric historically for each underlying to know what's normal. Higher IV premium = better expected edge. Avoid underlyings where IV consistently under-delivers (options 'cheap' for a reason).

Based on research: Enter at 45 DTE, IV Rank > 50%, short strikes at 16 delta. Exit at 50% profit OR 21 DTE, whichever first. Stop loss at 2x credit. Roll tested sides once if > 21 DTE and credit available. Don't enter around earnings. Backtest these rules on your specific underlyings. The key is consistency - follow the rules even when tempted to deviate.

In contango (normal), all expirations are fairly priced - standard 45 DTE works well. In backwardation (elevated near-term IV), consider whether the elevated IV is event-driven (avoid) or a general spike (could be opportunity). If term structure kinks at a specific month (earnings), avoid that expiration. Some traders exploit term structure by selling the 'expensive' expiration relative to others.