The Iron Condor Strategy is the great strategy for option traders looking to profit from the stock market without having to pick direction. Ideally, these option trades perform best in non trending markets, however, they can also be successfully used during trending and more volatile markets as long as the one trading them has the knowledge and the ability to spend the time necessary to properly manage and adjust them.
This is a spread that takes advantage of theta decay in options - the fact that options are a decaying asset and lose value over time. Once an iron condor trade is placed, and expiration day approaches - as long as the ’sold’ strikes of the position are placed far enough outside of ‘harms way’, these trades can normally expire worthless giving the iron condor trader a substantial return in a very short period of time.
Iron Condors are actually constructed from 2 separate credit spreads - one on either end from where the underlying be used is currently trading at. Positioned above the underlying current trading price is a bear call spread. Positioned below the current trading price is a bull put spread. Depending on the broker being used, these can be placed separately as individual vertical spreads- or together as one iron condor trade.
As long as the vehicle being traded remains within the range created by the iron condor, the position should wind up being profitable. If the trade was set up correctly, there should be ample room on the chart for the underlying to move around. However, if the underlying makes a larger then expected move in either direction, the iron condor position will most likely need to be managed and adjusted in order to prevent losses.
This type of trading strategy provides a very high probability of success - and can be profitable most of the time. However, it is important to note that the risk to reward ratio of these trades are NOT ideal - as one losing month, if not properly managed, can wipe out an entire years worth of gains. Learning how to set correct profit targets, exit and stop loss points, as well as gaining the appropriate knowledge on how to properly manage and adjust an iron condor position that is getting into trouble is vital to long term success with this trade.
Many iron condor traders grow over confident because they win for a number of consecutive months using this trade. Then they are woken up as the inevitable problem month comes along and destroys a significant portion of the their trading account. This could have been averted if they had only properly prepared before hand and learned how to correctly place, exit, manage and adjust these trades.
This is exactly what happened to me when I first started trading the option greeks iron condor strategy - and I had to learn this lesson the hard way through taking a large painful loss to my own account. Had I just taken the time to learn the risk management and hedging techniques taught at this iron condor training website, I could have avoided much of this trading pain.
Mr. Ted is an option selling loony - enthusiastic unusually with trading the option greeks . Go to his Iron Condor site to see his crazy elementary method of playing the weeklys for dependable returns - and supplementary wonderful option income ’stuff’.