Not a trade alert here, more of a portfolio-construction question...
Ive been looking at neutral iron condors and realized I was treating ticker count as diversification when what really matters is correlation...
If a condor book is concentrated in SPY/QQQ/mega-cap tech and the individual trades can all start near flat delta and still turn into a big short-put book during a selloff.
The test case that changed my view was a small three-condor book that started around -0.15 portfolio delta and swung to about -1.95 after a synchronized move in SPY, QQQ, and AAPL... That feels like the real hidden risk...
For those of you who trade condors systematically:
\- what correlation threshold makes you treat positions as one cluster?
\- do you decrease size when VIX gets above a certain level?
\- what’s your preferred way to hedge book-level downside without destroying edge?