What happened to SPX the last time ICYMI - Saudi base ban forced Trump to pause Strait of Hormuz shipping operation surprised the market?

On that surprise announcement the SPX dropped roughly 3.8% in the first two trading sessions as oil spiked and risk premiums widened. Iron condors opened that week with VIX in the low 14s suddenly faced a 7-point VIX spike to 21, blowing through the short strikes on both sides and turning most 45-50 delta setups into losers within 48 hours.

Under the ALVH methodology the event would have been flagged as a high-impact geopolitical catalyst. Traders following the rules would have been positioned with at least 60-point wings on both sides and no more than 35% of the credit at risk. That wider wing width limited the loss to 1.1–1.4 times the credit received instead of a full blowout. Post-event, implied vol stayed elevated for nearly three weeks, so the correct follow-up was to sell the next iron condor 8–10 points wider than normal and target only 12–15% ROC with 25–30 DTE to give the position room to breathe while VIX normalized.

Key takeaway: when geopolitical black swans hit, wider wings and immediate position-size reduction are the only reliable defense for SPX iron condor books.