This a good point for discussion. 1) I now try to use verb 'trade' rather than buy or sell. It avoids confusion. 2) I was not aware that TOS, or other brokers, used 'sell.' 3) I use the terminology that my broker, InteractiveBrokers uses. 4) Here's why I believe that the way I use the terminology is correct, despite the obvious disagreement. [BTW, I got it wrong in my book. I use 'sell' throughout. But that was because I thought it was 'obvious' that sell is correct. I have since changed my mind.] Consider a long condor position. I'm sure we all agree that when you have this positon, you BUY the condor; Long Nov 35 call Short Nov 40 call Long the call spread Long Nov 55 put Short Nov 50 put. long the put spread You buy both spreads. You pay a debit. you own the condor. Just the same as buying the butterfly. Now the question is, what makes this 'long?" Is it the fact that cash is paid? Probably. When we own a condor, we profit when the stock does not move outside the range. Let's look at the 'iron' equivalent of this condor, also a position that profits when the stock does not move outside the (same) range. Long Nov 35 put Short Nov 40 put Short the put spread Long Nov 55 call Short Nov 50 call Short the call spread It seems logical to me that if I am LONG the condor, and the <i>equivalent position</i> is an IRON condor, then I should be LONG the IRON condor as well. Thus, to me the debate is: Are we long the iron version because it has the same risk/reward parameter as the regular condor? Or are we short the iron condor because equivalency doesn't matter. What matters is the fact that we sold two spreads and collected cash. I vote for equivalency being more important. But, I do see a point of controversy. Long a call spread is equivalent to being short the put spread. These are surely equivalent. So the argument becomes more subtle. It's okay for a long call spread to be equivalent to being short a put spread because the spreads have different names: put spread vs. call spread. But because they are both condors (iron being an adjective, and not meant to represent a different spread) then long one is long the other. I wonder who should make the final decision - but clarity on this point would be a good thing. Mark
Thanks for sharing, at least this let me know i am not alone that can't get the fair price this day in the filling of my IC.. I will give it a try again next week and slashed another 20 cents from mid price, hope will get filled this time..
Equivalency is totally irrelevant here! - If you enter a position and pay money for it then you're long and you bought it. - If you enter a position and you received money for it then you are short and you sold it. How can you buy something and be short it? Your reasoning doesn't make sense and it is actually confusing. Another way to look at this - when you enter an iron condor (short the body and long the wings) the worst price you can trade it at is the aggregate bid price. When you exit it the worst price is the ask price. So again, how can you buy something with the max slippage at the bid, or sell something with the max slippage at the ask. It's just goes against everything else in trading.
I don't know what the official terminology is but FWIW, some web sites decribe a long iron condor as selling the two OTM credit spreads. Most condor sites that I've come across tend to avoid the confusion by describing it as the combination of two credit spreads or selling a strangle and buying a more OTM strangle.
I hear you. And you make sense. But to me, equivalency also makes sense. I'd like to find a source with the definitive answer. I was trained as a chemist and nomenclature was crucial. Yes, one could draw the chemical formula, but the name of a specific molecule must be unique with no possible misunderstanding. That's what I'd like to have in the options world. What about my example: If I buy Oct 80 call; sell Sep 75 call and pay $0.05, am I buying the diagonal spread? If I do the same spread but collect $0.05, am I selling the diagonal spread? Absolutely not! In that scenario no one would be able to tell what someone meant when they said 'buy' the spread. There must be a definition. I don't think cash is the definitive factor in defining buy vs. sell. But if I hear the right argument, I can be convinced I'm wrong. Mark
I THINK THE BEST WAY TO LEARN IS TO READ THIS FORUM. IT IS AN EXCELLENT AND CURRENT SOURCE OF INFORMATION. ALSO GOOGLE IRON CONDOR AND READ EVERYTHING YOU GET YOUR HANDS ON. UNDERSTAND THE CONCEPT..TRADING IS NOT BLACK AND WHITE AS YOU HAVE READ. MOST OF US HAVE DEVELOPED A BASIC SYSTEM, BUT THE MANAGEMENT REQUIRES SOME GUT AND INTUITION. ALTHOUGH, IT SEEMS THE INTUITION AND GUT IS A KILLER MOST OF THE TIME. THERE ARE A NUMBER OF GOOD PEOPLE THAT CONTRIBUTE HERE...READ, READ, READ. LASTLY, IF YOU AHVE ACCESS TO ONE, I SUGGEST YOU OPEN A PAPER TRADE ACCOUNT SOMEWHERE AND PRACTICE. FOR MY TRADING, IB IS THE BEST BROKER--REAL-TIME PAPER TRADE ACCOUNT, AND REAL-TIME MARGIN REQUIREMENTS, WHICH YOU WILL NEED.
IT VARIES, DEPENDING ON THE VOLATILITY AT THE TIME. WITH ALL DUE RESPECT, YOU NEED TO DEVELOP YOUR WING SPAN (AND BODY WIDTH) ACCORDING TO YOUR OWN COMFORT ZONE. THE LONG OPTIONS ARE YOUR ULTIMATE INSURANCE LEGS. YOUR SHORT OPTION PLACEMENT ALSO DEPENDS ON YOUR COMFORT ZONE. THERE IS NO SET FORMULA AS ANY IC TRADER WILL TELL YOU.
THIS IS A GREAT QUESTION. FUNNY THING. MY SHORT OPTIONS ARE SO FAR OTM THAT THE UNDERLYING HASN'T TOUCHED THEM. I ALSO SUBSCRIBE TO THE MEAN REVERSION THEORY--TO REPEAT THE MARKET BOUNCES AROUND. EVEN IF THE UNDERLYING DID TOUCH, I WOULD HOLD OUT FOR A TIME. SO FAR, I HAVE WITNESSED BOUNCE UP OR DOWN JUST ABOUT EVERY TIME. SOMETIMES THE MARKET SIMPLY STAYS FLAT WITH NO SERIOUS BOUNCE OR PULLBACK. AND YOU KNOW HOW ERRATIC THE AMRKET HAS BEEN THE PAST COUPLE OF YEARS. I HAVE TRADED THROUGHOUT THE LAST TERRIBLE MARKET AND THE ONLY TIME I HAVE SMALL LOSSES OR MINIMAL GAINS IS WHEN I FOOL WITH THE MANAGEMENT OF THE TRADE.
I ACTUALLY SOLD BEAR CALLS ON THE WAY DOWN TO 665 ON THE ES. IT DID GET A PROFIT ON THREE OF THEM. IT IS THE LAST FIVE THAT ARE ARE KILLING ME. BTW, THE AVERAGE STRIKE ON THE CALLS WAS 770--OVER 100 POINTS FROM THE LOW. STILL, I DIVERGED FROM MY PHILOSOPHY. I SIMPLY SHOULD HAVE SAT STILL.