Hello there! Could you please help me with suggestions? I have an IRON CONDOR on EWZ. I received a credit on this one. The stock is currently at 21.65. And the spreads 35/36 (puts) and 42/43 (calls). My question is if I can let these 4 options expire worthless? Or should I close only the PUT that has been shorted, as I assume it may be assigned. Not sure about this, though. Could this short put be assigned? Alternatively, I don't know if there's a way to manage this trade and minimize my loss. Any ideas? Thank you!!
First of all, I am just an amateur retail trader, so this is not professional advice. This is what this newbie would do if I were in your situation: 1. I thank my luck star and congratulate my judgement that I have a condor instead of a short naked puts. 2. I would re-assess the thesis of why I did what I did. If the thesis is still correct, I stay the course. If not I get out. In this business, there is no 100% win rate, you win some you lose some, comes with the territory. However, if I did it because I had no concept, just that others told me condor was a very low risk way to print money, I get out right now. 3. I look at the probability of whether the underlying could move in to range during/by expiration. If high, I might stay, if low, I get out. 4. A very simple way to make the assessment is from folks like @Kevin Schmit: Look at the delta of the tested leg vs underlying spot, it gives an approximate probability of getting in range by expiration. 2 x delta gives the probability of touch. 5. If I venture to guess, based on the spot and short put strike I think the probabilities of both are low. 6. Next question I ask myself, what if I only close out the tested legs? I don't have the answer but IMHO, it is a bad strategy. I had been burned numerous time for legging in and out. Post mortem analysis => I would be better off just close things out. 7. Finally, what about roll? Us newbie should know that "roll" are two separate transactions. You take a loss on your condor and initiate another condor. It only makes sense if you would do the new condor absent the old. Good luck and I hope this helps.
Some thoughts: • your options will not (all) expire worthless: you own the 35 and owe the 36, right? • closing only the 36 will have you paying now *and*hoping* that the market continues to fall further, for your 35. So, do you expect that? Meh. • any equity/related put may be assigned. and lastly,... • a condor anticipates the underlying maintaining a market value within the short legs. If you were to roll as a condor, do you expect no upside pop? No face-ripping climb?