Net Position: This is typically a net debit trade even though the cost is normally relatively low.
Next go to another volatility strategy, Long Iron Butterfly, to learn how profit can be make from a volatile stock.
As the payoff diagram above shows, this strategy profits as long as the stock or index you are trading stays within the two upper and lower spread positions. When I entered the position I was being extra conservative (as always) and had a very wide Iron Condor. Being as the trade was getting close to the upper spread, I decided to roll the upper spread higher and take a small overall loss on the position at expiration. Establishing your Iron Condor position sometime in the range of 30 to 40 days until expiration is best. It’s this constant trade-off between risk and reward that we have to look at as option traders.
The Iron Condor strategy is a great conservative, non-directional tool for options traders.
Take your time with these as a beginner and learn how each part works when building the Iron Condor position. The higher profit potential is only realized when the options are close to expiration date. When you enter the trade, the stock price will typically be in the profitable area of the risk profile.
And as always, I’m never afraid to talk about these “bad trades” because we can all learn from them. But what happened on this particular trade was that I left more downside room anticipating a continued sell-off. Looking back of course the market move lower right after we put moved our spread higher and had we not done anything we would have had a completely profitable Iron Condor. Of course as traders we can never know for sure where the market is going which is why I’m so conservative in my own trading.
This will optimize the time decay feature of the options and still allow you enough time to get far from the market with the premiums. Different market conditions will yield different opportunities and you have to balance the risks and rewards.
Knowing what the likelihood is that the market will move to such and such price really helps determine if the trade is worth risking the money.
I would suggest that you start out trading the spreads that have 80% probabilities of being successful and tweak your trading plan as needed from there.
If you focus on trading high probability spreads and stay away from the high return trap that some beginners fall into, then you will be well on your way to success. Regarding the IC, yes they are not for trending markets and work best in high volatility markets and I would never sell ITM options.
Iron Condors are a relatively conservative, non-directional trading strategy that when used properly can produce some very nice monthly returns. We had to make an adjustment to the position which cost us money and threw the trade into a slight loss overall. Just wondering if we use in the money options for selling in the iron condor, will that help in trending market because premium is always high for in the money options.
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