Example Trade: Iron Condor with Stop and Stop Adjustment (0-DTE)
The Iron Condor is a popular options strategy that bets on sideways movement of the Underlying. It consists of four options: two Calls (one Short and one Long) as well as two Puts (also one Short and one Long). The goal is to generate premium from time decay while the risk is structurally limited by the respective Long options. Deviations are possible, such as early assignment or pin risk.
In this example, an Iron Condor is traded on a daily basis (0-DTE). The closing logic is based exclusively on a defined Stop Loss that is automatically adjusted once a partial profit has been realized.
Structure of the Iron Condor
The Iron Condor consists of two groups:
Group 1 - Call Side:
- Short Call (e.g. Strike 6450)
- Long Call (e.g. Strike 6470)
Group 2 - Put Side:
- Short Put (e.g. Strike 6350)
- Long Put (e.g. Strike 6330)
Each group receives a Short Leg as a Main Leg (the first defined Leg in the group) as well as a dependent Long Leg, which is automatically positioned relative to the Main Leg.
Important: In OptionsApp, per group there is always exactly one Main Leg - that is, the first Leg in the group. Multiple dependent Legs (e.g. for hedging) or also independent additional Legs can then be attached to it. The dependent Legs always refer to the one defined Main Leg.
Therefore, in this case two groups must be created so that a separate Main Leg can be defined for both the Call side and the Put side. Only this way can the respective Long Legs be cleanly set up as dependent Legs with a defined Strike distance.
Stop Loss on the Shorts
A Stop Loss is set for each Main Leg, which is set at 200% of the premium collected. This means: if the premium of the respective Short Leg triples, a Market Order is triggered and the respective group is closed.
The Stop is not set on the Long Legs, as these primarily serve as hedging and do not determine the risk.
Stop Adjustment
Additionally, a Stop Adjustment is activated: as soon as a Short Leg achieves 50% profit (i.e. premium has fallen from 1.00 to 0.50, for example), the original Stop Loss is automatically tightened - in this case also to 200% of the reduced entry price.
Example:
- Initial premium: 3.00
- 50% profit reached: premium falls to 1.50
- New Stop: 1.50 × 2 = 3.00
This means the original loss range is significantly narrowed once a partial profit has been achieved. Further details on this feature can be found in the article"Stop Adjustment"in the documentation.
Implementation in OptionsApp
In the Trade Template, proceed as follows:
- Create two groups: "Put Side" and "Call Side".
- Define a Short Leg (as Main Leg) in each group.
- Add a Long Leg as a dependent Leg with a fixed Strike distance to the Main Leg in each case.
- Define the following P&L Actions for both groups: Stop Loss: 200% of the premium Stop Adjustment: Trigger at 50% profit, new Stop at 200% total (i.e. 100% markup)
- Stop Loss: 200% of the premium
- Stop Adjustment: Trigger at 50% profit, new Stop at 200% total (i.e. 100% markup)
- The entire trade is planned as a 0-DTE strategy.
- A Profit Target is optional in this setup.
Important Note on Order Submission
A Trade Template - regardless of how many Legs or groups it contains - is always submitted as a single combined opening Order to the Trader Workstation (TWS). OptionsApp checks not whether the constellation will be accepted by the broker. Invalid combinations (e.g. incorrect ratios or invalid connections) may be rejected by the TWS.
The Close Orders (Stop, Take-Profit, etc.) are, however, submitted individually according to the definition of the P&L Actions. This means that, for example, a group is closed when the Stop level of the Main Leg of that group is reached - not necessarily the entire Iron Condor.