When selling iron condors, we like to collect a credit that is ⅓ the width of the strikes. So how big exactly are these wing widths?
When looking at 25 delta options in SPY, we find that $5 wide wings let us collect about $2 in credit (⅓ of the wing width). However, this wing width can change as implied volatility, price, and DTE change. The $5 wing width also has a decent tradeoff between risk and reward.
When comparing the $5 wing width to the $10 wing width, we see that the $5 wing width has lower risk but still collects a good amount of theta. Therefore, we like to collect a credit equal to ⅓ the width of the wings because we can collect a sufficient amount of theta while mitigating potential losses.