Ive got a simple (i believe) question for you...

I've tried a few, but I don't really like them.  The problem with trading spreads is if you're wrong, you usually have to pay money to roll out in time. If you just traded the strangle, you could roll the losing side out in time to give yourself a chance to be right and let the winning side expire. Plenty of people seem to make money with them though.

I'll see if I can answer your question.

ETA - rolling naked options out in time almost always gives you a credit unless they're deep in the money. So you get paid to give your bet longer to be right.

I'll start by saying I'm a total newb with IC spreads. I'm only trading them in simulation right now. I still have a long way to go.

When I look at the risk chart I see my max profit is an area between the two short strikes, the two long strikes define safety net limiting risk. As long as my underlying security stays between the short strikes I will make max profit which was the credit I received when selling the spread. Of course it will be something less than max profit if I close the IC before expiration (which I always do). Basically I'm getting paid with theta decay. The more time elapses while security is in the sweet spot the more money I make.

Here is my question. Should my IC spread P/L for a day always be positive while the stock stays in the sweet spot? Since my short strike values are moving in opposite directions shouldn't they null out and leave me with the days time decay as my profit that day? What kind of P/L behavior should be expected while the trade is in the sweet spot? I ask because I have seen some days where one of my test ICs (in the zone) shows a loss.

Did that make any sense?

There is more that goes into options pricing than just the price of the underlying.  If implied volatility increases then the prices for the options will increase.  If there is a lot of movement in the stock, then options could become more expensive, and even though both short options are out of the money, you could still show a losing position.  Generally implied volatility increases when stocks go down and decreases when stocks go up, but that is not always the case.

The other thing you've got to realize is that the delta for an option increases the closer it is to being in the money. So if the stock gets closer to one of your short options you will lose money faster on that side than what you're gaining on the other side.

Hope this helps.

I just realized I never thanked you for the post. Yes, you did help me. I was defiantly over simplifying.

In ToS it really helped me to picture it using the analyze tab pushing through the dates until the purple line reached expiration.

Options are complicated, but they provide a lot of opportunity.It is definitely worthwhile to learn about them. How wide are you making your spreads? Are your iron condors always symmetrical or do you ever show bias in one direction by either widening out one side or placing it closer to in the money?

Right now I'm kind of on pause with the neutral trades while I wait for the brexit thing to stabilize.  I had 3 ICs open on indexes when the vote came in and it obviously killed them.  I actually just closed the bull sides of the spreads and let the bear sides go a little while longer which definitely minimized my losses (as opposed to closing the whole spread).

To answer your question I've been looking for stable indexes to trade against and I set my short strikes to roughly the support and resistance levels over the past 3ish months with a little more space on the downside than upside owing to the fact that bad news moves them much faster than good news. Long strikes are about 2-3 strikes further otm. More recently I've actually been selling the bull spread separate from the bear spread to maximize credit depending on the market swings over a week or so.  I'm still working on the how much time to build in.  I'm doing 60ish days to expiration right now but I'd like to figure out how to reduce that and still keep my credit up. I close the trade at 50% gain. Id' like to take that to 60% once my confidence goes up. I also close (or partally close) if the index makes a massive move one way or the other in the first 10 days of  the trade.  

I'm still very new to adjustments and I've had several techniques for adjusting but I'm not totally comfortable with making adjustments just yet.  Right now I will generally close an IC with low profit earlier and start over than adjust.  Obviously it would be better to learn how to adjust properly but I'm getting there. I'm also considering the strangle trade as well since right now my risk plan closes the trade if it gets too close to an edge.  Strangle improves my credit significantly.

So am I thinking right? Any advice?

It sounds like you've got a pretty good plan. Legging in and out will work until it doesn't though. It could get frustrating if you get a big move against you and you've only got one side on. Most people take some directional risk, and it's fine, but you have to be more confident in being right.

Strangles will be much easier to manage because you can always just roll out your tested side in time and your commission cost will be cut in half. You have to be comfortable being naked though. You might try being naked on one side with defined risk on the other naked by putting on a jade lizard or reverse jade lizard.

You could also widen out your iron condors to 5 or even 10 points wide and they would act more like strangles, but you would still have some defined risk in case of a large move against you. These would be easier to manage than narrow iron condors also because you can usually roll out in time for a credit if the price is closer to your short strike.

More risk is easier to manage and has a higher probability of profit, but it can hurt more on days like Friday.