I've been contemplating this strategy as well. As a matter of fact, I tried to incorporate it into a thread I strated last week. However, there wasn't much discussion on it. Mike, How long have you been doing this... "reverse" iron condor? Do you establish them as a strangle or straddle with one leg itm? The only problem with them is that the risk/reward is not very strong when they're established atm or itm; although the probability of success is reasonably high. Mark, I too would be interested in your book. Can it be found on your website? BTW, what's your take on the "reverse" iron condor? thanks, Walt
As a rule of thumb, I try to establish the "reverse" iron condor (i.e. bull call spread & bear put spread) with a 4:1 risk/reward ratio. In other words, for every $5 spread between the debit & credit legs, I try to pay no more than $2 for them. Therefore, $2 on each side will have a total cost of $4. Such a trade would give me a max gain of $1, which is a 25% return on my invested risk. I would establish the positions 4+ weeks out. Less than that becomes too risky in my opinion. For these type of trades, the more time til expiration, the better.
I like condor's but sometimes I just find the adjustments to be a bit brutish: where I want to simply tweak some Greeks, in many instances I end up moving around an entire leg of the position, which of course is a serious opinion on the future moves of the underlying as well as commission intensive. All in all, as long as the VIX is under 28-30, and the market is not moving too quickly, these are a nice play.
I'm sorry, but I wasn't referring to condors when I was using the term "reverse" iron condor, as introduced by Mike. Perhaps mike was referencing a condor, but I thought that he meant a simultaneous call debit spread and put debit spread. Mike, When you mentioned "reverse" iron condor, did you mean 1) a condor, or 2) a bull call spread & bear put spread positioning? thanks, Walt
http://www.theoptionsguide.com/reverse-iron-condor.aspx That is what I mean. Also that site has all the complex option orders and how to create them.
Walt, 1) You can find the Rookie's Guide link at my web site (www.mdwoptions.com) 2) It's also available from Amazon 3) I've been trading options since 1975 (professionally since 1977) and I never heard that term: reverse IC. I assume that it's merely the mirror image of an iron condor. Thus, you buy a put spread and buy a call spread. I'm very interested in reading Mike's take on the play. It's not a bad idea in these volatile times, but my guess is that the cost to buy those spreads is rather high - and that removes some of the attractiveness. Considering that I sell those OTM spreads - and don't feel safe without owning insurance, this is an interesting alternative. Probably not my cup of tea, but Mike, the floor is yours. Mark
As far as I can see iron condor and reverse iron condor are the strategies that belong to 2 polar worlds: former is a market neutral strategy and as for the latter my guess would be that it requires market timing to be profitable.
I must be missing something. When you say $5 spread between...do you mean: buy 95/100 call spread; buy 85/90 put spread; paying a total of $4? What would you pay for the 95/100 call spread and 80/85 put spread? Mark