Iron Condor using Max Pain


The last two months have been difficult for hedging strategies over one week- like a weekly iron condor.

Is it just a blip or should we generally consider max pain on the expiry day only?
Is max pain any useful to create a hedge strategy for positional?

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The question arises on how you decide the weekly Iron condor range.

If you use the price action theory, they are not hitting stop loss at all.
If you’re using the OI theory in the way we interpret here it is hitting stop loss.

Last week was bad week for N and this week was bad for BN. It is mostly due to the sudden huge fall and rise up when Nifty broke the 11000 mark.

The historical win ratio (not backtested. Telling from forward test.) comes at 82% which is pretty good. But the loss when it happens, happens in a nasty way.

The maxpain positional straddle strategy has been actually outperforming compared to the IC model because of our rebalance technique as well as on the fact that market is actually coming back to the same range post rebalance.

Maxpain on the expiry day is “exponentially significant” if we take the exponential part from “Theta”. But that is theoretical approach. The practical approach is all about “daily volatility” which is also grossly overshadowed because of “Theta”. Actually everything is overshadowed by Theta. Right…