Ask ten iron condor traders when they close and the discretionary ones will describe a feeling. The systematic ones will give two numbers: 50 percent of the credit, or 21 days to expiration, whichever comes first. ACondor LLC builds options trading software that runs inside a trader’s own brokerage account around exactly those two rules. This post explains what each one says, why they work together, and what the software does with them on every open position. The trade mechanics themselves, from strike selection to the credit collected, are covered in the company’s explainer at https://acondor.com/blog/how-iron-condors-generate-income
What the 50 percent rule actually says
An iron condor is sold for a net credit. That credit is the most the position can ever keep, and it is kept in full only when all four legs expire worthless. The 50 percent rule, taken from widely published broker research on managing short premium positions, says to buy the condor back as soon as the closing price is half the opening credit. A condor sold for $1.20 is closed when it can be bought back for $0.60. A condor sold for $2.00 is closed at $1.00.
The rule is deliberately indifferent to the calendar, the chart, and the trader’s opinion. It does not ask whether the underlying looks calm or whether the second half of the credit seems easy. It asks one question: can the position be closed for half of what it brought in? If yes, it is closed.
Why the second half of the credit is not worth the wait
The reason to leave half the credit on the table is the shape of the risk, not the size of the reward.
The first half of the credit tends to decay away early. The underlying still has room on both sides, the short strikes carry little gamma, and every calm day takes a bite out of the position’s value. The second half decays slowly, and only if nothing happens. During that slower stretch the position still carries its full defined risk, the spread width minus the credit received, every single day.
Put the two halves side by side. In the first stretch the trader is paid well for the risk carried. In the second stretch the trader carries the same risk for a shrinking reward, with gamma rising as expiration approaches. Closing at 50 percent exits at the point where the remaining reward is smallest relative to what is still at stake.
There is a second benefit that is easy to miss. Closing frees the buying power. A new condor entered at a fresh 30 to 45 days to expiration puts that capital back into the part of the decay curve where it works hardest, instead of leaving it parked in a position that has already done most of what it can do.
The 21 day line
The 50 percent rule needs a partner, because not every condor reaches the target. Some drift sideways for weeks. Some get tested on one side, recover, and sit near breakeven.
The same body of research found that by about 21 days to expiration a typical short premium position has, on average, decayed to roughly half its opening value, and that holding past that point trades shrinking daily time decay for rising gamma. Gamma is the rate at which a position’s directional exposure changes, and it accelerates into expiration. The last three weeks carry outsized risk for diminishing reward.
ACondor’s answer is a hard line. Mechanical iron condors are closed at 21 days to expiration regardless of where the trade stands. A condor that never reached 50 percent still leaves the book that day. A condor sitting at a small loss leaves the book that day. Between the two rules, no mechanical position is meant to see expiration week, which also keeps it clear of pin risk and assignment on expiration Friday.
Why the order of the exit rules matters
Software has to decide what to do when more than one rule could apply. ACondor evaluates every open position on every cycle against a fixed list, and the first rule that fires wins.
For the mechanical iron condor engine the order is:
- The 50 percent target.
- An optional stop at twice the credit received, off by default.
- Delta defense, when a short strike’s delta reaches 0.45.
- The 21 day close.
The target sits first on purpose. A position that has reached 50 percent is closed before any defensive logic looks at it, so a trade that has done its job is never rolled, adjusted, or defended into a longer fight. Defense only runs on positions that have not yet earned their exit.
Two details the software adds
The first is a spread guard. Options quotes widen, especially on the far legs of a condor, and a 50 percent close taken through a wide market can give back a meaningful slice of the credit in slippage. When the widest leg of a position is quoted more than 30 percent wide, the software defers the target close by one cycle rather than pay a poor fill. Defensive and must-fill exits are never deferred by this guard, so nothing is ever stranded behind it.
The second is a cooldown. After a target close, the same symbol is not re-entered for two hours. After a 21 day close, the cooldown is 24 hours. The point is to stop the software from reflexively opening a fresh condor into the same conditions the last one just left.
Other engines, same target
The 50 percent rule is not limited to the mechanical engine. ACondor’s volatility contraction engine opens shorter dated positions after an implied volatility spike, typically at 7 to 21 days to expiration. It uses the same 50 percent target, but the 21 day line makes no sense for a position that was opened inside 21 days, so it is replaced by a close once IV rank has normalized to about 30, backed by a three day safety close.
A scale-out ladder also exists in the software: close a quarter of the position at 25 percent, half at 50, and the remainder at 75. It stays off by default until live fill data has been reviewed, because a ladder that looks good on paper can be eaten by fills on small positions.
What the rule does not do
A 50 percent target closes positions that are working. It does nothing for a position that moves against the trader before the target is reached. That is the job of delta defense, the 21 day line, and the account level circuit breakers that sit above every engine. No exit rule guarantees an outcome, and options trading involves risk of loss, including the full defined risk of every spread that is open.
ACondor is software that executes rules a trader chooses. It is not investment advice.
Next step
Traders who already follow the 50 percent rule know the hard part is not the rule, it is applying it on every position, every day, without exception. That is what the software is for. Request early access at https://acondor.com/early-access to have exit rules enforced on every open position in the trader’s own account.
ACondor LLC
+1 575 312 9326
2521 North Main Street, Las Cruces
Unit 1-276
Las Cruces
New Mexico
88001
United States
