Adapting a neutral income strategy to thrive when volatility is high and ranges are wide.

Iron condors are traditionally used in range-bound, low-volatility markets, but they can be adapted for fast-moving, high-volatility scenarios too.

With the right adjustments, iron condors let you harvest premium even when price swings are large, as long as you stretch the wings wide enough to avoid being hit.

Why Iron Condors Still Work in Volatile Markets

  • High volatility means options premiums are elevated
  • Wider ranges mean you can set your short strikes further apart
  • Time decay works in your favor, as always, if price stays within your zone

The key is to build iron condors with wider wings to accommodate bigger moves.

How to Build a Wide Iron Condor

  • Sell an out-of-the-money call and put with strikes much further from the current price
  • Buy further out-of-the-money call and put as your wings for protection
  • All legs have the same expiry

The result: you collect premium, but your break-evens are much further apart, giving the underlying asset more room to swing.

Adjusting for Volatility

  • Use options chain volatility data to choose short strikes beyond expected move
  • Widen the gap between short and long legs
  • Accept a smaller net credit for much lower risk of being breached
  • Monitor implied volatility, when it is high, lean toward iron condors; when it collapses, take profits or reduce exposure

Risk Management Tips

  • Never sell condors too close to the money in a volatile market
  • Be willing to adjust or roll strikes if price approaches your shorts
  • Use subaccounts on Derive to manage multiple condors across different expiries or asset pairs
  • Always know your max loss, which is capped by the wings

On Derive

  • Build iron condors with any width you choose, instantly seeing margin and break-even levels
  • Visualize payoff diagrams for wide-range setups
  • Track Greeks and adjust live as volatility changes
  • Use subaccounts to test different condor structures or layer them for income stacking

Your Action Today

  • Look at the options chain for BTC or ETH during a high-volatility period
  • Build a wide iron condor with break-even points well outside the expected move
  • Note the net premium, max loss, and range
  • Practice adjusting or rolling legs as price and volatility shift

Tomorrow, we will explore synthetic positions - how to recreate any option exposure using combinations of other instruments.

Coming tomorrow:
Day 31 – Synthetic Positions: Replicating Payoff Profiles

Hasta manana
Cpt