Cboe S&P 500 Iron Condor Index (CNDR)

The Cboe S&P 500 Condor Index (CNDR) is inspired by the condor option strategy. The objective of a condor option spread is to mine "out-of-the-money" option volatility premium with limited risk. A generic condor option spread is short an out-of-the-money straddle and long further out-of-the money call and put that bound the risk of the straddle. The CNDR index follows this strategy and sells a butterfly spread of the S&P 500^® one-month options (SPX options). More precisely, it tracks the value of a hypothetical portfolio that overlays a butterfly spread of SPX options over one-month Treasury bills. The short SPX straddle is at-the-money and the long SPX call and put are 5% out-of-the-money. To guarantee solvency, the Treasury bills cover ten times the maximum loss of the short butterfly spread. The CNDR portfolio is rebalanced monthly after the expiration of SPX options, typically 11:00 a.m. ET every third Friday. New SPX options are then bought and sold.

Resources

• CNDR Index Methodology Paper
• CNDR Historical Price Data

Short Iron Condor Strategy

Goal

Short index iron condors often are established at a net credit, and if the stock index stays in a narrow range, there is potential for there to continue to be a net credit.

Strategy

To implement an index short iron condor strategy: take four options positions with the same expirations: (1) sell index calls, (2) buy index calls at a higher strike price, (3) sell index puts, and (4) buy index puts at a lower strike.

Comments

Both the calls and the puts often are out-of-the-money at the initiation of the strategy. The potential for both profit and for risk usually is limited for short iron condors.