I'm in agreement with DRCHA. In order to succeed with trading, for the most part you have to get something right regardless of whether you're trading direction, non-direction or volatility. Perhaps you leg in advantageosly. Or you adjust well (booking profit or mitigating loss) - and get some help from the market. Or you cut losses before they get out of hand. No position can be continuously and lazily put on blindly and expect to succeed nor can you dismiss any option strategy as a road to failure. It depends on one's skillset.
Maverick, Please define this "fair value" you speak of...? I'll give you a hint...there's no such thing.
Of course it does. We can solve backwards for fair value at expiration and derive what each call and put should have traded at a specific point of time based on the expiration value of each. So at the time of your trade, you are either buying an option that is above or below that value or selling an option that is above or below that value.
Go and try it. If you do a monthly IC (with those 10% return), come back to me again after five years (60 months) and tell me if you are profit or blow up ?
Hmmm...I don't hold my IC trades to expiration. Try again. (And please don't say "solve backward from when you would have closed the position" I'm sure you can see the problem with that train of thought)
Look, you are not understanding something. It does not matter when you close your position. In fact, you have the same problem when you close your position as when you open it. At the end of the day, you are either buying or selling your options above and below fair value or you are not. No amount of trickery can get around this. It's very hard to argue with you iron condor guys because you live in a world where you actually think theta is an edge. I quite frankly am not interested in discussing the 1000 different ways that is false. There is no edge in putting on iron condors every month if you are not modeling volatility, period. There is nothing you can argue about this. Getting out early is not an edge!!!!!! Selling 5 delta vertical spreads is not an edge. Even if you go way way way way way way out of the money....that is not an edge! Your ability to close a position early. I mean come on people, this is a zero sum game and you are trading against professionals. Do you really think having a pulse and an internet connection is the path to financial freedom? LOL.
Fair value implies risk neutral pricing (however you want to define that) - you can certainly make the argument that the latest market price is 'fair value', although 100:1 says if a basic BS model values a call at $1 and the offer is $.02 you're buying. -my 2c
Wow, I think I hit a nerve... Lost a couple Gs on condors, eh Mav? Still stings a little? If you want to resume when your hissy fit is over I'd be happy to discuss the above fallacies/half-truths. Your call.
My point is that it's entirely possible to leg-out of condors prior to expiration for profit (long term, not every trade). As Maverick pointed out in such an adult manner, it does involve volatility analysis.
No nerve hit. I don't trade iron condors. If I want to make .30 I'll scalp two ticks in the spoos instead of sitting on a risk for 30 days waiting for those two ticks. I understand how you think. I don't have a problem with legging positions but once you do that you become a directional trader. I don't have any issues with that either but then one's long term success will be a function of their directional trading skills. And if you are so good at legging, whether it be legging in or legging out, then why not trade the underlying? I never get a good answer for this. There are a million ways to trade options, iron condors simply have the most negative edge of all of them. It's analogous to Keno in a casino. Keno has the highest negative edge of any casino game but it's the most fun to play, especially for older people. Iron condors are the same way. At the end of the day, when you trade options, you are either trading volatility or direction or some combination of both. You are not trading time or theta. If you even have the slightest bit of success legging your positions, you will have a far better risk to reward structure just scalping a few pennies in the SPY a couple times of month or trading pure gamma. And btw, not everyone that disagrees with you is having a hissy fit. I've discussed this shit for years on this forum and it's guys like you that actually made me not want to post here anymore as it has become an extension of the optionetics cult.