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Let’s briefly analyze the monster we call the Iron Condor and see if this is a strategy that’s scalable. In other words, will it work with a lot of capital? After all, if you can’t use it with a lot of capital then where can this type of trade ultimately take you?

So ask yourself this question. Would you put a million dollars on an Iron Condor? Would you feel reasonably safe and comfortable doing it? If you answered yes, then you must read the rest of this article because I want to open your eyes to a couple of things that you’ll happy to find out. Those who know a lot about options trading would not put a million dollars on a 30-day condor. The same can be said, by the way, for a 30-day credit spread.

Major league investors who trade $1,000,000 to $25,000,000 would not put their money on a traditional trade like this. They couldn’t do it safely using this type of strategy. They simply wouldn’t do it and here’s why.

Let’s take a typical condor and look at the probability for a given month. Starting out, we often have the illusion of a trade with an extremely high probability of profit, let’s say it’s almost 80%. So you could easily think, why not make this trade with a lot of money? Why not put a million dollars on a trade like this to have an 80% probability of gain?

With only a 20% probability of loss how could you lose?

Yet how about if there’s another flash crash and the market suddenly has a sharp drop of, say, 10%? And what if you have a 25 point rise in volatility in just a day or two? Now how safe and secure do you feel about risking your investing nest egg on this type of trade? If your investment at this point is even $17,000, you could already be down more than $7000. Now where do you stand? Let say you’ve lost $7200.

Well, this is exactly why this type of trade is not scalable. 7200 divided by 17 gives us a 42% draw down. This means that at any point you’re in this trade you can lose 42%. And that’s if the sudden drop happens on the first day.

If you’re a week and a half into this trade and then you have a 10% crash, you could easily be down $12,000. If you experience this type of drop on the last couple of days of the trade you could lose 100%. This is why I say this style of trading is not scalable. This is also why lots of option traders repeatedly experience catastrophic losses - over and over again.

The bottom line is that you are risking 40% at any given moment, for as long as you’re in the trade. It would be extremely hard to grow an account very large with this strategy. The more you have, the more you can lose, so eventually… the odds are that you’ll lose it all back. You’ll wind up getting nowhere after potentially years of hard work.

Are you going to put a million dollars on an Iron Condor and risk $420,000 (42%) in one day? That’s half of your million dollars. For some people it takes a lifetime, or two lifetimes, to build up a million dollars. Are you really going to risk it in one day?

If you want to learn more about our unique, proprietary options strategies simply come to our free webinars. Learn something new that’s meant for today, not something as out of date as the condor, credit spread, butterfly and calendar spread. These are all very dated strategies. We’ll show you why. We’ll make you a better option trader.

Live discussions explain and clarify the patent-pending option trading strategies we developed and teach exclusively at San Jose Options Mentoring.