ACondor LLC explains the 50 percent rule: why systematic traders close an iron condor once it can be bought back for half the credit received, how the 21 day line backs it up, and how its software runs both exits on every position.
-- Every iron condor seller eventually faces the same question: when to close. ACondor LLC, the company behind the ACondor options trading software that runs inside a trader's own brokerage account, has published an explanation of the 50 percent rule that systematic premium sellers use to answer it, why the rule pairs with a hard close at 21 days to expiration, and how its software applies both on every open position. The mechanics of the trade itself are covered at https://acondor.com/blog/how-iron-condors-generate-income
An iron condor is sold for a net credit, and that credit is the most the position can ever keep. It is collected in full only if every leg expires worthless. The 50 percent rule, drawn from widely published broker research on managing short premium positions, says to buy the condor back as soon as it can be closed for half the credit received. A condor sold for $1.20 is closed when it can be bought back for $0.60. The other half of the credit is left on the table on purpose.
According to the company, the reason is the shape of the risk. The first half of the credit tends to decay away early, while the underlying still has room on both sides and the short strikes carry little gamma. The second half decays slowly, and only if nothing happens. For every day the position stays open it still carries its full defined risk, the spread width minus the credit. Closing at 50 percent removes that exposure at the point where the remaining reward is smallest relative to what is still at stake. It also frees the buying power for a new position entered at a fresh 30 to 45 days to expiration, where time decay is running at full speed again.
The 50 percent rule has a partner. The same body of research found that by about 21 days to expiration a typical short premium position has, on average, decayed to roughly half its opening value, and that holding past that point trades shrinking daily time decay for rising gamma. ACondor closes mechanical iron condors at 21 days to expiration regardless of where the trade stands. A condor that never reaches the 50 percent target still leaves the book on that day. Between the two rules, no mechanical position is meant to see expiration week.
The software evaluates every open position on every cycle against a fixed list of exit rules, and the first rule that fires wins. For the mechanical iron condor engine the order is the 50 percent target, an optional stop at twice the credit received that is off by default, delta defense when a short strike's delta reaches 0.45, and the 21 day close. The order matters. A position that has reached its target is closed before any defensive logic looks at it, so a trade that has done its job is never rolled into a longer fight.
Two details are added on top. The first is a spread guard: when the widest leg of a position is quoted more than 30 percent wide, the software defers the 50 percent close by one cycle rather than paying a poor fill to take a target. Defensive exits are never deferred by this guard. The second is a cooldown: after a target close the same symbol is not re-entered for two hours, and after a 21 day close for 24 hours, so a fresh trade is not opened reflexively into the same conditions the last one just left.
The company's volatility contraction engine, which opens shorter dated positions after an implied volatility spike, uses the same 50 percent target but replaces the 21 day line with a close once IV rank has normalized to about 30, plus a three day safety close, because those positions are entered at 7 to 21 days to expiration in the first place. A scale-out ladder that closes a quarter of a position at 25 percent, half at 50 and the rest at 75 exists in the software but stays off by default until live fill data has been reviewed.
ACondor is software that executes rules a trader chooses. It is not investment advice, and no exit rule guarantees an outcome. Options trading involves risk of loss, and a 50 percent target does nothing for a position that moves against the trader before the target is reached. Traders who want exit rules enforced on every position, every cycle, can request early access at https://acondor.com/early-access
Contact Info:
Name: Robin Lilly
Email: Send Email
Organization: ACondor LLC
Address: 2521 North Main Street, Las Cruces Unit 1-276, Las Cruces, New Mexico 88001, United States
Phone: +1-575-312-9326
Website: https://acondor.com
Source: NewsNetwork
Release ID: 89207557
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