Options Strategy Labs: 2007

Over the past year, several Options Labs have tested market-neutral strategies such as iron condors, iron butterflies, calendars, and double diagonal spreads on the S&P 500. Although these strategies have been profitable since 2001, the positions were always in the market, a potential drawback for trades that attempt to capture time decay in flat markets.

This system tests non-directional iron condors with a different approach. Instead of entering positions in any market, it uses the Average Directional Movement Index (ADX) to find flat markets. The ADX is an oscillator that ranges between 0 and 100 and is designed to measure whether a price is trending without regard to the direction of the trend.