This is a very good question that comes up often, so this should be a good discussion.
For this model portfolio I want to hold no more than 4 Iron Condors at any given time. I dont believe that holding 20 different Iron Condors at any given time provides diversification because when the market sells off and IV spikes, so do premiums across all positions. Therefore, a good starting point is to take total capital allocated towards trading ICs and splitting it into 4 sleeves. I also picked 10 contracts for each IC because on a smaller number of contracts initial directional exposure (NET delta) is very insignificant and if a trade gets to a point where I need to adjust, I will have to use options that are very far OTM as hedges and that will make it very ineffective (for smaller size trades, I’d use SPY options as hedges because SPY is 1/10th size of SPX). So when someone says “Do you use 25% of your account for each trade?” The answer is No. First you need to understand how much of total capital will be allocated for Iron Condors. Then you want to understand how many positions can you balance at once without feeling like you’re getting overwhelmed. These two factors are different for every trader but should be the starting point deciding how to deploy capital in income trading.