Iron Condor When/how to adjust ?

Discussion in 'Options' started by grainmerchant, Jun 2, 2007.

  1. Interested in the iron condor as a strategy to use in multiple markets. Any certain gameplan you like for adjusting?

  2. Adjustments = death
  3. FT79


    Are you buying them (paying premium) or selling them (receiving premium)? I only use strategies where I receive premium because imho you should use options (optionstrategies) to collect the premium (I love theta)
  4. Iron Condors are a marketing gimmick perpetuated by the exchanges to increase volume/revenue.
  5. FT79


    could you explain why? because under Reg T it's not efficient to sell options naked. Iron Conder is a "perfect" way to collect premium including reducing the exposure.

    Wit SPAN like margin calculations I prefer selling option naked. (disclaimer: this strategy can only be used if you have a lot of experience and understanding of options because it will eat you alive when things go wrong :D)
  6. The long positions is your "adjustment" in that it will cap your loss to a predetermined amount. One ET poster summed up IC's or Credit Spreads as "you eat like a mouse but shit like an elephant", which is how they are.

    The problem with IC's is that to get decent premium you have to enter them very close to ATM and it might not take much to move the stock past one of your short positions, if this happens during after hours then there is nothing you can do. Also if you have found a good IC candidate that seems like a good deal check to see when earnings are, chances are that the IV is inflated because of the earnings coming up. One "marketing gimmick" for IC's is that you can profit if the stock trades flat - true - but stocks rarely trade flat, if the stock has a history of trading flat then the premiums collected will be peanuts and any unexpected news will wipe out 10 such trades.

    If you post an example of an IC you have your eye on then you will get more detailed answers about any problems you may encounter with it.
  7. Because there is no edge to speak of. Let's say you move to the floor and are allowed to trade IC's only(your preferred trade) day in, day out by buying the bid and selling the offer. If you hold these to expiry, it's still a coin-flip! Just because a position has long theta, does not mean it has a distinct advantage. The reason being it is short gamma. There is no free lunch. These multi-legged spreads touted by the exchanges and other 'educational options gurus' are nothing more than smoke and mirrors. Risk is just transferred between greeks.
  8. I guess that's how I've always viewed it. Put it on and let it play out. Just always hearing the gurus saying "adjust". Never could see where "adjust" actually helped because my risk was capped the minute I put it on. By the way, I'm referring to IC's a credit strategy, not debit.

    Yes the potential loss is greater than the potential gain, when selling two sets of credit spreads.

    Okay then, what about ratio backspreads?

    Sell strike closer to the money, buy 2) options OTM for very little debit?

    Thanks for all the replies.
  9. FT79


    I agree with you there is no such thing as a free lunch because trading is a zero-sum game and with option trading the market maker has the edge. The only “edge” you can have is managing your position. I have made money with selling Iron Condors (only indices). Personally everyday I ask my self if the position is ok with the current market situation, if not I change my position. Imho option trading is like chess, you have to think ahead and be focused on reducing the risk and the Iron Conder is part of the strategies you can use.
  10. Opra


    Care to be more specific on how you change your position? By closing out (one side or both)? Or by adjusting up/down?


    #10     Jun 3, 2007