This is my current list of 3 dte Iron Condor trades.
Finding The Right Candidates
The criteria for stocks to make it on my 3 DTE list is very simple:
- I look at the last 5 years of data of certain stocks and the Return on Capital must be 100% or better. This is an average of 20% return per year. Of course, some years are worse than others as you will see in the individual price data graphs. I may move this percentage higher to filter out even more stocks.
- The pricing chart must be in an overall momentum pattern for the last 5 years. I take a brief glimpse at the stock’s pricing chart in order to get a visual and feel for the stock’s movement. I look at the daily and weekly time frames. Nothing fancy.
If those 2 conditions are met then the stock makes it on my 3dte list. This is my Stock Options Voodoo.
Of course, there are no guarantees when it comes to winning trades, but I like to use charting and statistical backtesting tools for my edge.
The whole idea is to trade these momentum stocks until they no longer work. The trades below are currently working for me.
I realize that if I look at shorter time spans of like a year, then I would find a lot more Momentum Stocks I could add to my list. I may look at that later, but right now these are still working for me and if premiums start drying up then I will reassess this strategy.
Note: I only use backtesting data for stock screening purposes and to help me construct trades. Backtesting data is not the holy grail. It is simply a tool just like charts and indicators are.
Some of these stocks really took off when the Feds injected money into the economy. As I said, I will trade these stocks until they quit working then reassess.
Open Iron Condor Trade on Wednesday
Sell a 10 delta Put
Buy a 5 delta Put
Sell a 10 delta Call
Buy a 5 delta Call
Below is what the trade would look like to open in Think or Swim.
Either 90% profit or 200% (2xs short legs) stop
Even though I open this trade as an Iron Condor, I typically close these condors out by breaking them up and set the stops automatically to 2xs the credit received on the short legs and trigger the longs legs to sell at market price if the stops are hit.
Below is how it would look in Think or Swim.
I will manually close out at 90% profit prior to the expiration. On expiration day I will definitely close out 1 hour before the market closes to avoid assignments.