Methodology

This page documents every formula, threshold, and rule used to compute the setups published on this site. Source code is open: https://github.com/lxhkings/iron-condor-math-engine.

Strategy

A 14-day Iron Condor: sell one out-of-the-money call spread and one out-of-the-money put spread on the same ticker, both expiring within a target window of 13–16 calendar days from the open date. The structure profits when the underlying closes inside the short strikes at expiration; max loss is bounded by wing width minus net credit.

Strike Selection (ATR-anchored)

For an underlying spot price S and its 14-day Wilder's ATR ATR14:

• Short call anchor: S + 1.5 * ATR14
• Short put anchor: S - 1.5 * ATR14
• Each anchor snaps to the nearest listed strike on the chosen expiration.
• Wing width: max(0.5 * ATR14, one strike spacing increment), snapped to listed strikes outside each short.

ATR14 Formula (Wilder's Smoothing)

TR_t = max(High_t - Low_t,  |High_t - Close_{t-1}|,  |Low_t - Close_{t-1}|)
Seed ATR = mean of first 14 TRs
ATR_t = (ATR_{t-1} * 13 + TR_t) / 14

Net Credit (Conservative Quoting)

Short legs are priced at the bid (worst realistic fill received). Long legs are priced at the ask (worst realistic fill paid).

Net Credit       = (short_call.bid + short_put.bid) - (long_call.ask + long_put.ask)
Wing Width       = long_call.strike - short_call.strike  (= short_put.strike - long_put.strike)
Max Profit       = Net Credit
Max Loss         = Wing Width - Net Credit
Upper Break-even = short_call.strike + Net Credit
Lower Break-even = short_put.strike  - Net Credit

If the computed Net Credit ≤ 0, no setup is published for that ticker that day; the ticker is logged as skipped in the public ledger.

Win Condition (Hold-to-Expiration)

A setup is recorded as won if and only if the underlying closing price on the target exit date satisfies:

short_put_strike <= underlying_close <= short_call_strike

Otherwise it is recorded as lost. Mid-cycle short-strike breaches are tracked but do not trigger early settlement — this is a strictly passive backtest harness, consistent with the disclaimer language in the site footer.

Liquidity Filter

A leg is excluded (and therefore the entire setup is skipped) if any of the following hold:

• bid <= 0
• (ask - bid) / mid > 0.30
• open_interest < 100

Settlement Edge Cases

• Boundary close: an underlying close exactly equal to a short strike counts as won (inclusive on both sides).
• Holiday-shifted exit: if the target exit date falls on a market holiday, settlement is recorded on the next valid trading day using that day's close.

Trend & Volatility Tags

The headline paragraph on each ticker page is selected from a 9-cell matrix indexed by:

• Trend bias: bullish if close > SMA20 × 1.005, bearish if close < SMA20 × 0.995, otherwise neutral
• IV percentile: high if >70, low if <30, otherwise medium
• Vol regime: expanding if ATR14 > ATR60 × 1.2, contracting if < ATR60 × 0.8 (rendered as a 1-sentence inline modifier)

Author

QuantOptions Data Lab. Data source: OPRA via MarketData.app. Source code (math engine only): https://github.com/lxhkings/iron-condor-math-engine.