About this template
The Ratio Asymmetrical Condor Spread attempts to provide a small hedge against slow grind-down markets by buying long put spreads every few days, while financing them by low-delta short put spreads. This bot is designed to make money in slow grind down markets, but will make minimal profits (probably closer to a scratch) in up markets. There continues to be risk to the downside in fast moving markets if the short put spreads haven't come off, especially if the long put spreads haven't matured.
The bot is currently configured to remove the short put spread after the short put spread has financed the long put spread.
Edit: 2023-11-22
Edit 1:
For those who might want to change symbols:
You probably will need to narrow the widths on spreads to accommodate lower priced underlyings. I haven't tested this, but I suspect you would need to keep the width ratio to be between 2:1 and 3:1 (meaning the width of the short put spread would need to be between 2 and 3 times the width of the long put spread width.
Edit 2:
The long put spread cost and profit target will also need to be adjusted downward if the spread width is reduced. It is going to be a challenge to get 300% profit on a .90 $3 wide spread unless it expires.
The important thing is to keep the 2:1 ratio of credit to debit.
End Edit: 2023-11-22
Below is a risk graph of the combined Long Put Spread/Short Put Spread position (1x2 ratio) at initiation. The price of SPY was approximately 450.79.
Initial Position Entry (Long Put Spread)
The initial position that is entered is a $5-wide long put spread that costs just over .95. This put spread is identified by started at $63 below the current price and walks the option chain by incrementing the strike price by $1 until it finds a spread that costs .95 (or more). An order is submitted to the broker once this spread is identified.
Short Put Spread Entry
Once the long put spread is entered, the bot triggers the automation that looks for the candidate short put spread using a similar process by examining $15-wide spreads starting $70 below the market and marching up the chain until a short put spread that can be sold for at least $1.15.
Bot Inputs
TICKER - SPY
I have only tried this on SPY.
EXPIRATION - 50 days - only monthlys
I have this set to monthlys only, which means that I usually will have 4 of the long put spreads expiring at the same time. I want to avoid the normal Friday weekly expirations, but would be OK with the Quarterly expirations. I am going to change this in my live bot, but will restrict the expirations of this template to match the current live bot.
Pricing
APPROXIMATE DEBIT - .95
The APPROXIMATE DEBIT is used to specify the cost of the Long Put Spread. I should have started near the money, and walked down the chain instead of how it's done.
MINIMUM CREDIT - 1.15
The MINIMUM CREDIT is used to specify the credit received for the Short Put Spread.
This bot uses the short put spread to finance the long put spread. Assuming the short put spread will close at about 50% of the credit received, the short put spread position needs to collect about 2 x the cost of the of the debit spread position. This can be done by changing changing the number of spreads and the minimum credit received.
The bot is currently configured to sell 2 x put spreads at 1.15 each (total of about $230) to finance the long put spread at .95 ($95). However, these can be changed to sell 3 put spreads at .75 ($225) or 4 put spreads at .60 ($240).
Capital Required
This bot requires a substantial amount of capital. Each short put spread requires about $2800 of capital and each long put spread requires about $100 for a combined $2900 capital. At max, you can have 5 weeks of open positions (1 short put spread position and 1 long put spread position), which would require approximately $15,000.
Impact of Changing Expiration
Decreasing the days to expiration will shift the spreads closer to the money. This is what you want for the long put spread, but not the short put spread.
Note: Having the long put spread as a shorter duration than the short put spread might be a good alternative.
Jan 5 (44 DTE), long strike at 446
Jan 19 (58 DTE) Long strike at 445
Feb 16 (86 DTE) Long Strike at 442
What is the impact of Changing Spread Widths
The spread widths are controlled by using automation-level inputs. The long put spread is set to $5 and the short put spread is set to $15. Making the long put spread wider will push the long put spread further out of the money. Decreasing the width of the short put spread will cause the short strike of the put to be closer the ETF's price, while the long put spread is more likely to be ITM (which you want) the closer it is to the underlying's current price. You want the long put spread to be closer the the underlying and the short put spread to be further from the underlying.
Below shows the impact of changing the long put spread from a $5 wide to a $10 wide spread. Note how the long put is now $9 further away from the underlying in the $10 wide spread.
Narrowing the width of the short put spread will push the short put spread closer to the current price of the underlying. Below shows a $10 wide short put spread compared to a $15 wide short put spread. The short put is $5 closer to the underlying.
