Strategies · Library · Options
§2.47Volatility
Long put condor
The put version of a long condor: buy puts at the lowest and highest strike, sell puts at the two middle strikes, evenly spaced, for a small debit. Gains if the price ends between the middle strikes.
- Asset class
- Options
- Held for
- To expiry
- Data
- ARCANE has part of the data
- Symphony
- Cannot be built as a symphony
The rule
- Signal
- Neutral: expects range-bound trading and low volatility.
- Entry and exit
- Buy a low put, sell the next two puts, buy the highest put, same expiry, for a debit. Hold to expiry or close early with the price in the band.
- Sizing
- 1 long, 1 short, 1 short, 1 long across four put strikes
How it fails
- Maximum loss is the net debit, if the price ends below the lowest strike or above the highest
- Maximum gain is limited to the strike spacing minus the debit, across a plateau
- Decay is friendly in the band and hurtful outside it
Data it needs
- options chain with strikes and premiums
- implied volatility
- underlying daily price
ARCANE has the underlying daily close but no options chains or implied volatilities
How ARCANE uses it
A Call that an index ends in a band around a level on a date matches this view; paper only.
Needs options; no holdings reproduce a flat profit plateau.
Filed under the volatility card
Hold less after a month of high volatility and more after a calm one. The paper found this raised return per unit of risk, because volatile spells are not paid for with higher returns.
A paper plan from this card holds 5 to 63 days, stops at 2.5× the expected move and uses at most 50% of your risk budget. The card
Source: Kakushadze and Serur (2018), 151 Trading Strategies, §2.47, p. 36 of the SSRN version. Described in our words. Volatility is ARCANE’s filing, not the book’s.