Condor Credit Spreads: Most common misconceptions, mistakes, lessons

Discussion in 'Options' started by tradingjournals, Sep 26, 2010.

  1. Among the misconceptions, I come across this one often: "condors are less risky because the probability of success on trade is high". High probability does not equate with low risk (even in indices such as in '87, '98, '08 are example).

    What do you think are the most common misconceptions, mistakes, lessons/etc that would benefit condor traders particularly the beginners and also the traders who did not yet get hit by bad trades?
     
  2. I'm still new to IC's, but I try to keep in mind that the call side can get blasted just like the put side. As a matter of fact, this month, if things continue to rocket to the up side, will prove that to me.
    Haven't lost, overall, yet, because of what I have to admit were some agile moves using the Sept quarterlies that are available on the ETFs that track the indices, but if not for that I'd be bleeding right now because of the call side of the IC.
    This week is going to be interesting to me from this perspective. We shall see.
     
  3. Find your spots to hedge with underlying (i.e. trade), otherwise you're a sitting duck for the big one.
     
  4. stoic

    stoic

    One big misconceptions (Example above) is that Condors are always Iron Condors for credit.

    There are:

    Long Condor Call Spread
    Short Condor Call Spread
    Long Condor Put Spread
    Short Condor Put Spread
    Long and Short Iron Condors

    Some are neutral to bullish or bearish, some depend on volatility.
     
  5. take your position, get the sum of all the greeks, then look at the p&l graph at various price pts with a time and iv slide and you have the complete picture and done. Doesnt matter if it's a condor, crane, dragon, or tiger. Trying to find rules to plug dozens of combos with fancy names to certain market conditions is hopeless, at least for myself.
     
  6. stoic

    stoic

    The greeks are calculated based on a theoretical model.........The greeks are calculated based on a theoretical model......... all together now. The greeks are BASED ON A THEORETICAL model.
     
  7. rosy2

    rosy2

    condors and flys dont really start paying off until closer to expiration
     
  8. Biggest misconception is vega. When the market moves down, the short put really shoots up compared to the ATM/ITM option on a percentage basis. Same with the shorAlso, margin requirements are much higher than for a comparable IB (iron butterfly). All this induces fear, for it is highly probably that the underlying touches one of the short options. Lastly, I feel that IC's need to be managed, and not left alone.
     
  9. What does this have anything to do with what I posted?
     
  10. spindr0

    spindr0

    The greeks are calculated based on a theoretical model.........
    The greeks are calculated based on a theoretical model.........
    all together now.
    The greeks are BASED ON A THEORETICAL model


    It was an OCD moment

    drumming fingers
    counting numbers
    drumming fingers
    counting numbers
    drumming fingers
    counting numbers
     
    #10     Sep 28, 2010