Advance discussion has taken place on this thread and few things are beyond me to understand. My knowledge on greeks is rudimentary. I sell IC only on weekly basis. I try to remain far out and advantage with IB portfolio margin is very low $200-500 per position. Cushion on a/c is maintained between 65-70%. Every thursday or friday I move or close position if necessary -others expire worthless (most of them) I make about 1 - 2% a month on my total capital with IB . Sometimes I do strangles -margin requirement is nearly double. Comments appreciated
Now this looks risky for me. You are trading weeklys, right? you say you stay far out the money; that means that premium must be low (much less then 100$) and risk must be high (at least 200$ or 300$). am I right? Gamma would be high on this spread - that means when the underline moves against you, you are losing money fast. For how long are you trading them? I wouldn't like to criticize a strategy that is working out for you but big gaps and any small hesitation in adjusting the position can lead to big loses. the bottom line: 1.I don't like it 2.Don't overlook the greeks, learn them!
I just read through this thread and found it very interesting. The most important thing to me is that putting on an Iron Condor is, like almost any other option trade, a bet on economics. If I put on an IC on SPY I am doing so because I believe that SPY will stay within a certain range for the length of the trade. Any other consideration is at best secondary. An IC on SPY : http://finance.yahoo.com/q/bc?s=SPY&t=2y&l=on&z=l&q=l&c= says I believe SPY will stay within range of the strikes. Much more important than any issue raised is what is the basis for that prediction and how reliable is it. Earnings, European Debt, Interest rates, political outcomes, the deal on Greek debt.... these are far more important than anything discussed here.
Thanks for your reply.I have not experienced big gaps on a weekly basis and I only trade ETFs like DIA, SPY, IWM and QQQ Yes i would like to learn more about greeks. Any readind material like idiots guides? Some book with plenty of examples? Thanks
I searched youtube to see if there was something interesting and I came across a guy who lacks in charisma but demonstrates the greeks on a high risk IC.. the type you like. There are 5 parts, follow them if you don't get bored with the broadcaster. start here http://www.youtube.com/watch?v=R0qRL8tk07k&feature=related and investopedia is always a nice place to learn http://www.investopedia.com/university/option-greeks/#axzz1kmWcrv2S BTW, even I trade IC's only with high volume ETF's, I think it's nice to have small bid/ask spreads and no earnings and stuff effecting the underline directly.
I trade iron condors sometimes, but I prefer iron butterflies. Much better risk reward. Sell the at the money and buy the further out options. Even better sometimes is buying more out of the money where you can make money on a big move in either direction while profiting if the security moves little.