Best approach to select strike prices for an Iron Condor?

Question

Options beginner here.

I'm aware of three popular ways to select strike prices for Iron Condor.

1. Select strikes such that they are equidistant from the CMP.
2. Select strikes such that the they form a delta neutral Iron Condor.
3. Select strikes having similar premium on both sides.

Which out of these should I choose and why?

The biggest question I have is that if I choose the strikes which are equidistant from the CMP, the put options are going to be of a higher value than the call options. So, in case if the price goes down, will the put options change with a similar rate as the call options would have in case the price would've gone up? If not, then I can choose this approach. If yes, then I'll have to go for either the second or third approach.

Answer 1

For a long Iron Condor, you want share price movement to exceed the long strikes.

For a short Iron Condor, you want share price movement to stay withing the short strikes.

For the most part, option strategies are either directional or non-directional and therefore, expected share price movement is the driving force for performance and should be the criteria for selecting the strike prices of the body. The wings should be chosen based on risk tolerance or desired profitability.

Puts aren't necessarily going to be of higher value than the calls because the carry cost increases call premium respective to put premium (the higher the interest rate, the higher the call premium). However, pending dividends have the reverse effect, increasing put premiums.

The short answer? Select your strikes based on your outlook for the underlying.