Iron Condor

Discussion in 'Options' started by TradingPilot, May 18, 2007.

  1. An Iron condor seems to good to be true. I am always very skeptic of strategies that just seem like easy money.

    Anyone here use the strategy often?

    Go easy on me guys im a n00b. :D
  2. What seems to be to good to be true. Like all option strategies it has a risk and reward make up (max risk and max profit you can make). You can lose money on an IC and make money as well. It is all in how you use the strategy.

    What exactly are you asking?

    (my hunch is that you are not asking how much you could lose...)
  3. Nanook


    Everything you ever wanted to know about ICs can be found within this ET thread:

    Helpful hint: Use ET Search function & Keyword "Iron Condor".

  4. I guess I should of written a better question.

    I am wondering if its one of the better income strategies?

    It seems to be the one with the least risk.
  5. Maverick74


    Iron condors are for suckers.

    Sorry Phil. :D
  6. Its ok, my option account likes them very much lol... and I only do ICs occasionally.

  7. As mentioned above the downside of the IC is the high risk/reward ratio. This ratio can be reduced is the position is closely watched. If the underlying stock gets close to either side of the condor it can be unwound for a small loss or even a profit if the trade has been live for a few weeks (time decay).

    If the stock gets close to the top end of the range the Bear call spread (top half of the condor) can be closed and the Bull put spread can be kept open leaving you with at least one side of the condor that is deep in the money.

    Hope this helps.
  8. Although he said it quite strongly, Maverick is right. It's not as secure income as it seems. Trust me. I know from experience. Fortunately it was with very small cash, doing 1 or 2 spreads here and there, following other people's advice to start small.

    If you do them on indexes and far out-of-the-money, you will profit most of the time. HOWEVER, those few times that you lose, you lose big. And as for rolling it farther out when it goes against you, Maverick is right in stating that a trader does not have a chance to recover from the original spread.

    For example, the Fed makes comments on future interest rates blew my SPX way OTM spreads out of the water. My spread tripled instantly.

    My advice is to read EVERYTHING that Maverick wrote concerning this. I did. He did not make me money, but he saved me a hell of a lot losses.

  9. [​IMG]
  10. I dont think I would say IC has the least risk. If you look at pure risk reward ratio it has a lot of risk. It is a good income strategy if you know how to sue it correctly but I would not put 100% of your account into it or rely 100% on it as your only strategy. It works best in certain situations and not in others like most strategies. So I recommend doing more research on it and how it works.

    I like the strategy but I would not say it is the best for everyone and perfect for all situations.
    #10     May 18, 2007