Of all the various option spread strategies out there, the iron condor strategy is perhaps one of the most popular, the most talked about, the most used (or misused) - and possibly the most dangerous and misunderstood option strategy of them all.
The problem is that way too many new option traders slap down significant money and start trading iron condors immediately upon discovering them without first equiping themselves with the proper knowledge and skills needed to trade them properly. They are so captivated by the stories and claims of ten percent months and 90 percent probabilities that somehow they don’t stop to think about what they are going to do if their trade doesn’t go exactly as planned.
And it seems that a good percentage of them - if not most of them - promptly wind up getting their groins kicked in, their heads ripped off, their eyes poked out, and getting hurt really, really bad.
Now wait -
I don’t want you to get the wrong idea here. So let me explain something.
I LOVE iron condors.
And yes - I really do think it’s a great and dependable way to trade.
And yes, I absolutely believe all those stories and claims you hear swirling around about iron condors generating ten percent plus monthly returns and providing trades that have the probability of winning somewhere in the range of eighty to ninety percent. In fact, I KNOW those stories are true because I see it happen all the time in my very own trading account.
The big problem is that there is some very important information being left out of those iron condor claims and stories. Information that I’m sure would keep alot of rookie option traders - who frankly just don’t know any better - from blindly making that ‘over-confident’ leap into the iron condor abyss.
See, while it may be true that the iron condor and credit spread strategies can kick off yields of over ten percent monthly and that they favor the trader by offering high probabilities of winning (in some instances as high as 80 and 90 percent) - what isn’t being talked about is the risk to reward ratio of these trades - which can be as high as 10 to 1.
That means that while trading these trades you are putting at risk 10 bucks for the chance to make just 1. Or - in reality, in the instance of say a standard ten lot index iron condor, you are risking ten thousand dollars for the chance to make just one thousand dollars.
And as my dear old mammy used to say: ‘that smells a lot like an awful bad egg’. Which in fact it is. That risk to reward ratio is nothing but a low down, no good, smelly rotten deal!
Because once you do the math you find that even with those glorious monthly returns with 80 to 90 percent probability of winning - all it takes is just one problem month to come along and cause a loss that will completely obliterate the 8 to 9 wins you’ve managed to rack up - as well as potentially the rest of your entire account!
Nevertheless…
All is not lost…
As I mentioned earlier - I really do LOVE trading iron condors.
It’s one of my favorite trades - and it continually generates profits for me.
So clearly there must be a way to profitably trade this strategy without allowing that awful risk to reward issue to get in the way.
And yes, there certainly is.
It all has to do with the management of the trade.
That risk to reward problem quickly becomes a complete non issue as soon as you educate yourself on the proper way to initially set these trades up and how to correctly manage and adjust them.
You just need to arm yourself with a small amount of trading know-how. A few iron condor tricks that will allow you to quickly and easily adjust yourself out of sticky situations and smother any problem month threat that comes along, permitting you to experience the iron condor strategy for all that it’s ‘really’ cracked up to be.
To learn how to properly trade the Iron Condor Strategy for consistent monthly income, go to this Iron Condor Adjustments website and watch our Free Video and get our Free Report.