Question about the Iron Condor strategy

Discussion in 'Options' started by shazam75, Mar 22, 2009.

  1. shazam75


    Hi All

    I see Mark advocates using the Iron Condor when markets are not very volatile - does this mean that the IC is best used when the volatility in the pricing of an option is low?

  2. With IC's, you don't want the underlying to approach your short strikes before expiration or exceed them by expiration. Is that more or less likely in a lower (higher) volatility environment?

    Ideally, you'd like high IV which results in higher premiums but lack of volatility in the underlying so there's no breach. But is that likely to occur?
  3. shazam75


    So an IC is similar to a short strangle with protection at either ends?
  4. Yep
  5. It <i>is</i> a short strangle.

    And you own a further out of the money strangle.

    You do not want to trade an iron condor when the IV of the options are lower than the recent volatility of the stock. That would translate into selling option premium for less that a fair value.

    My belief is that I'd rather trade in a lower volatility environment, earning a little less, but having a greater probability of owning a winning position.