Iron Condor

[lordvid]

Has anyone here used an iron condor? Or experience knowing how it works?

 

[chiadam]

Yes. It's the same idea as trading butterflies, except you are buying/selling a strangle for the "meaty" options rather than a straddle. Specifically, buying an iron condor is very similar to buying an iron butterfly (which, of course, is the same as synthetically selling a butterfly).

 

[marina]

Has anyone here used an iron condor? Or experience knowing how it works?

If you want to sell iron condors then watch video by http://www.optionsnerd.com/OptionsRepairsDVD.htm
One bad month will kill you.

 

[Lyosha]

http://www.optionsnerd.com/OptionsRepairsDVD.htm

... oww my eyes...

 

[Devdeep]

Has anyone here used an iron condor? Or experience knowing how it works?

I have definitely used in the past... you essentially use it when your view about the market/stock is neutral... that means you think the market/stock/ETF will trade sideways within your time-frame of interest.

You can get a lot of details here: http://www.theoptionsguide.com/iron-condor.aspx

The thing to remember here is that, for this trade, your MAX profit (which is the premium collected) will always be much less than your MAX loss (difference between the call/put strikes; assuming even)... but you generally have probability on your side...

Also... when crazy things happen... you still have well-defined loss... so the idea is that if you do this kind of trade many times (and you are good at it)... probabilistically you should have an edge!

 

[chiadam]

Also... when crazy things happen... you still have well-defined loss... so the idea is that if you do this kind of trade many times (and you are good at it)... probabilistically you should have an edge!

You certainly do not have an edge. If there were some edge there, it wouldn't be priced that way.

 

[Marcus Felker]

One very good use of Iron Condors is trading the skew curve of the various indices. Such as RUT or SPX. So for example I like to watch the difference of the SPX ATM IV and the IV of the 10 delta puts along with SPX ATM IV against the 25 delta calls. During times of elevated Volatility by putting on an Iron Condor with an expiration of between say 30 and 60 days, You have sold both put skew and call skew at relativity high levels.... Provided you have set up your spread to be close to delta flat you stand to profit from both your positive theta but also from the flattening of the skew. In summary Iron Condors are a good limited risk way of taking advantage of High Vol high skew environments.....