21. Double-double Iron Condor

A normal iron condor is made up of ashort put spread and ashort call spread
In theory if the strikes prices are the same width in the put and the call, this would be a delta neutral stratrgy
However because the volatiliy skew is not linear the strategy is not really delta neutral
IV is higher for low strikes and lower for high strikes
To fix this we would need to open a dynamic iron condor, where the prices are not equidistant, but we pick the strike prices that are equal
Generally because of the volatility skew in equituies, the put spread with will be wider than the call spread width
Because of this we have a greter buying power reduction in our account
To compensate this we can open an additional short call spread , a rule of thumb would be that if the put spread with is 2 times higher than the call spread width we can add this position
This new iron condor is not delta neutral,. it has an additional short call spread resulting in negative delta
In ths example we analysed a scenario that is typical of equity products (Reverse Skew). This can be applied to undelyings wih forward skew as well (Commodities)