We are coming into the day already LONG the 1990-1980 $10 wide SPXPM put spread.
We are looking for enhancements and going to walk through some basic Condor thinking.
Double click image for zoomed view.
The analysis page has two difference condors that at first glance are both priced the same i.e. $1.60 at the time of screen shot.
one wing 20 dollar wide, vs. one 10 dollar wide twice. both at even pricing.
Which to chose, and why?
There is a slight difference on the risk graph on both condors, with an educational underlying point to demonstrate.
Graph One.
VS.
Graph Two
One trade while, while similar margin has a slightly larger Risk graph meaning one trade contains a slightly better probability edge over the other. as show in the outer wing break even price comparison. Trade two will go into max loss slightly before the other trade.
Also depending on where placed on the Probability Bell curve both trades will not stay at the exact same price with increase and decreases in volatility.
With both, Time and Volatilities sensitivities will change, as they will NOT both price out the same forever.
While Qued up and monitored the spreads deviated as much as .20 between each other.
Also the inverse thinking should be applied while choosing a closer to the money vertical to make up the condor, I.E. its better to do twice as many spreads closer, compared to one larger spread, as its Max profit price would be slightly closer to the money, where as on the wing, a single wider spread benefits by pushing away the max loss point when compared to twice as many spreads done closer, if pricing allows for an even choice.
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