Stochastic Optimal Control of Iron Condor Portfolios for Profitability and Risk Management

Hanyue Huang, Qiguo Sun and Xibei Yang

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Abstract: Previous research on option strategies has primarily focused on their behavior near expiration, with limited attention to the transient value process of the portfolio. In this paper, we formulate Iron Condor portfolio optimization as a stochastic optimal control problem, examining the impact of the control process \( u(k_i, \tau) \) on the portfolio's potential profitability and risk. By assuming the underlying price process as a bounded martingale within $[K_1, K_2]$, we prove that the portfolio with a strike structure of $k_1

Date: 2025-01
New Economics Papers: this item is included in nep-rmg
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