I did a stimulated Siamese Condor (via ThinkorSwim). Last November, bought a SPY Siamese Condor for a credit of 5.33 with a range of 18 points. Today, sold the SPY Siamese Condor for a debit of 3.97. The SPY finished near the middle of the Siamese Condor. Roughly, that translates to a 25.52% profit. What's a Siamese Condor? It's the same as the Iron Condor, except the short call and short put are at the same strike price. By doing this, you maximize the premium credit for the same risk as the Iron Condor. Here's an article on Siamese Condors: http://www.sfomag.com/homefeaturedetail.asp?ID=1563109335&MonthNameID=September&YearID=2004 I think if I were to open a Siamese Condor, with a range of 18-20 points and 3 weeks to expiration, I would have a 80% of a successful trade.
But one of the short options will always be ITM, maybe even DITM. I don't see any benefits in that, or am I missing something?
An iron condor with the short call and put at the same strikes is called an iron butterfly. The max potential profit is higher, but the stock has to get pinned to the strike to get it. An iron condor has a wider profit range. By the way, you can't buy something for a credit and sell something for a debit. When you get premium (a credit) you sell a spread, when you pay premium (a debit) you buy a spread!
By the way, is it just me or the guy who wrote the article thinks that he has invented the wheel or something...a siamese condor.... .....the rest of us have been having trading the "not so fancy name" iron butterfly for years!
Really? Pre-linkage, even with the SIAC consolidated feed (slightly slower than direct-from-exchange feeds), I "bought" (long wings, short 2x middle) credit flies on nearly a daily basis.
Jesus man, even the absolute beginners of those "green boards" trade them iron butterflies. Siamese my foot. :eek:
The Risk/Reward ratio is very good, can't get much higher. But because the Iron Butterfly is so close to the current stock price - one short option always ITM - a small movement could cause a loss. While an Iron Condor with a much lower R/R ratio would still be profitable.