I've added a new strategy to the site: the Tight IC. It's a very different animal from the Rule of 16 and Implied Move strategies, and it wins far less often. But when it wins, it wins big, and five years of backtesting say that trade-off works in its favor. Here's how it works and why.
The idea in one sentence
Sell a very narrow iron condor centered on the day's opening price, and get paid for betting that SPX finishes the day right back near where it started.
Most of my other strategies place the short strikes far away and collect a small credit, winning most days and occasionally taking a large loss. The Tight IC flips that. The strikes are close, the credit is large, and the maximum loss is small. You'll lose on most days, but each win covers several losses.
How the trade is built
The trade uses the 9:30 ET opening price of SPX, rounded to the nearest $5 strike. From there:
- Short call 10 points above, long call 15 points above
- Short put 10 points below, long put 15 points below
That's a $5-wide iron condor with only 20 points between the short strikes. For example, if SPX opens at 7,721.70, the center is 7,720, so the trade is 7,705 / 7,710 puts and 7,730 / 7,735 calls.
The backtest assumes a credit of about $4.10, which means a maximum loss of only $0.90 per contract ($410 to win, $90 at risk).
Why it enters 30 minutes after the open
The strikes are locked to the opening price, but the site doesn't record the entry until 10:01 ET. That sounds odd, but there's a good reason.
Because the strikes are fixed at the open, the result only depends on where SPX closes relative to those strikes. Entering at 9:30 or at 10:00 produces exactly the same win or loss, and only the credit changes. Waiting out the chaotic first half-hour gives a more stable price to fill against, and it lets the site capture a real, live credit instead of a guess.
The two filters
The trade is skipped on days that historically tend to run away. Both of these have to pass:
- 3 EMA above 9 EMA on the daily chart, using closes through the prior day. When the short-term trend is weaker than the medium-term trend, days tended to be bigger and less predictable.
- Overnight gap of 30 points or less between the prior close and the open. Big gaps often lead to big trending days.
Together, these filters skip roughly half of all trading days. That sounds like a lot, but the days they remove are the ones that did the most damage.
How it settles
Unlike an all-or-nothing trade, the Tight IC settles on how far SPX closes past a short strike. Using the example above with a $4.10 credit on one contract:
| SPX close | What happened | P/L |
|---|---|---|
| 7,720 | Closed between the short strikes | +$410 |
| 7,732 | 2 points past the short call | +$210 |
| 7,740 | Beyond the long call | −$90 |
Break-even is roughly 14 points on either side of the open.
What the backtest shows
These results use daily SPX data, one contract, a $4.10 credit, and both filters applied:
| 1 year | 3 years | 5 years | |
|---|---|---|---|
| Trades | 119 | 432 | 682 |
| Profitable days | 33% | 39% | 38% |
| Total P/L | +$7,267 | +$37,523 | +$54,984 |
| Average per trade | +$61 | +$87 | +$81 |
| Max drawdown | −$1,162 | −$1,162 | −$1,534 |
| Longest losing streak | 13 | 13 | 13 |
Every calendar year in the five-year test was profitable, including 2022, which was a losing year without the filters.
Position sizing
The site starts this strategy at 2 contracts and scales up as it builds a cushion: 3 contracts at +$2,000 of running P/L, 4 at +$4,000, and 5 at +$8,000. If running P/L drops below a tier, it steps back down automatically.
Here's the same backtest with that scaling applied, compared with trading a flat 1 contract:
| 1 year | 3 years | 5 years | |
|---|---|---|---|
| Total P/L, scaled (2 to 5 contracts) | +$29,103 | +$181,147 | +$268,065 |
| Total P/L, flat 1 contract | +$7,267 | +$37,523 | +$54,984 |
| Max drawdown, scaled | −$5,630 | −$5,810 | −$7,580 |
| Time to reach 5 contracts | ~3½ months | ~7 weeks | ~8 weeks |
Because the top tier arrives quickly, the scaled version spends almost all of its time at 5 contracts. That's where the bigger returns come from, and also the bigger drawdowns. A full loss at 5 contracts is $450, and the worst drawdown in the test came close to wiping out the $8,000 cushion that unlocked the top tier.
What could go wrong
I want to be upfront about the weak spots here.
- The credit is everything. The backtest assumes $4.10 every day, but real credits change with volatility. The break-even credit is somewhere around $3.30 to $3.70 depending on the period, so a few dimes of slippage matter. This is the main reason the site records the real credit at 10:01 on every day, including skipped ones.
- Losing streaks are part of the deal. With roughly 60% of days losing, streaks of 10+ losses happen. At 5 contracts, 13 losses in a row is about −$5,850.
- You'll be underwater most of the day. In the past year, SPX never once stayed within ±10 of the open for a full session. Winning days almost always move outside the short strikes and come back by the close. That's why this strategy holds to expiration with no stop.
What to watch: the dashboard shows the backtest's $4.10 next to the live credit for every day. If the live credits consistently come in well below $4.10, the backtest results above won't hold, and I'll update this post with what the real numbers show.
As always, this is not financial advice. It's a strategy I'm testing in public so you can follow along and see how it holds up with real market prices.