Iron Condor – How To Fix An Ulcer

June 15, 2012 by Ted Nino  
Filed under Investment

When I first began trading the Iron Condor, my game plan was to leave the trade on all the way to the bitter end.

Then – if everything went well and the trade stayed beneath my profit tent – I’d just them expire worthless and keep all that sold premium in my account.

Back then I believed this was the best way to play the trade, because not only would I not have to pay my broker to take the trades off – I would also be able to keep the entire amount.

But that was a long time ago – and since then – things have changed.

Now, after experiencing too many nights where I couldn’t sleep, a number of very ‘close calls’, more than my fair share of stinging ulcers and even a near hernia, I’ve made a change to the way I trade iron condors.

Here’s what I do now: Right after I put on my iron condor, I tell my options broker (through the use of automatic contingent orders) to buy back both the put credit spread and the call credit as soon as I make the bulk of available profit in each spread.

As an example – if I received a credit of a dollar (let’s say about fifty cents each side) when I put an iron condor trade on – I would immediately ask my broker to set up an order to buy the vertical spreads on each side back when the price on them has been reduced to about ten cents or so.

After I place the trade, I would set up two contingent orders with my broker. One would be to buy back the upper half spread of the iron condor for ten cents – and the other to buy back the lower half spread of the condor for five or ten cents.

Now a lot of iron condor traders might say this would be a dumb thing to do.

But personally – I completely disagree.

Okay, maybe it’s true that doing this will cause me to make less profit than if I were to just hold the trade through expiration and let the options expire worthless.

But not necessarily.

Let’s take a second look at the amount of money we are talking about here. Ten cents per side – or twenty cents total. Okay – sure – it’s nothing to sneeze at – but when you step back, get a broader look, and start to take a few other things into consideration – it can actually start to look quite miniscule.

What’s more important to me, is that by buying back those credit spreads, I’ve LOCKED IN the BULK of the profit.

AND – my risk in the trade has been reduced.

AND – I’ve created the potential to make even MORE money on the trade than was originally possible when I first initiated the trade – WITHOUT increasing my original risk.

Let me show you what I am talking about here:

I’ve found that many times during a trade, the premiums in options can drain quite rapidly. In fact, its possible for a spread to drain the majority of its premium in a matter of days.

Say I put an Iron Condor on XYZ – 40 days from expiration – for a credit of $1.00 – or.50 each side.

Immediately after placing the trade, XYZ heads downward over a number of days.

4 days after I put the trade on, I see that I can buy back my CALL side of the Iron Condor for.10.

Now, if I don’t do anything and just let the trade continue to play – what I am actually doing is risking that upper side spread margin – for the next thirty six days until expiration – for just ten little dollars of additional potential profit. And that doesn’t really seem that worth it to me.

On the other hand, if I buy it back for.10, I lock in the bulk of the profit for the CALL side – making that ROI in just 4 days.

And then, if our underlying suddenly turns around and shoots back up (which actually happens quite often) – I have no worries whatsoever since I no longer have any upside risk in the trade.

And – for icing on the cake – if it DOES head back up we have the opportunity to ‘resell’ those identical credit spreads – the same ones we just bought back for ten cents – for potentially the same amount of credit we originally sold them for – or perhaps even more. Doing this it’s possible to wind up with an even greater ROI then were were hoping for when we first initialized the iron condor trade.

But let’s just say we didn’t ‘re sell’ any options. Let’s just assume that we closed the trade entirely when our contingent orders were hit. In this case what we’ve done is eliminated risk (good thing) – freed up capital (good thing) – enlarged our return on investment over the number of days we have been in the trade (good thing) – and gotten completely out of the market a while lot sooner than if we had to sit around and wait until expiration day rolls around (and in my opinion this is a good thing too!).

See, I really love the idea of being able to tad a ‘trading vacation’ – or what I mean by that is a ‘break’ away from trading – of having to one way or another ‘engaged’ in the stock market every day. I love being able to be in a trade for a week or so – and then take a week or so off – away from my trading computer screen. I love being able to get out and do other things without having that little worrisome ‘trading nag’ in the back of my head – always wondering what’s going on in the stock market and wondering if my position is doing okay.

Getting this ‘trading break’ away from the iron condor- this freedom to go out and do things without always feeling the need to check quotes on my phone – not having to worry about always being ‘on game’ and strategizing in my head about what adjustments I might have to make – just being able to sleep in mornings for as long as I please without stressing out about whether the market is going to make an opening gap…

These things are priceless.

Or at the very least they are WITHOUT A DOUBT worth every penny of the ridiculously small .20 cents or so of potential profit left on the table in exchange for getting out of my monthly iron condor trade early – at what is STILL an incredible monthly return.

To watch more about the iron condor approach, click over to this training site for stacks of free education videos, illustrations, and tutorials on how to fittingly start, exit, oversee and adjust the iron condor strategy to produce a ongoing monthly source of revenue.

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Does The Iron Condor Strategy Actually ‘Do It’?

May 14, 2012 by Ted Nino  
Filed under Investment

What exactly is the iron condor? This is a trade that makes profit when the underlying market being used is range bound. Of course options traders try to utilize strategies that can take advantage of movements in the market. Many times – and maybe most of the times – there is not a lot of movement and the underlying just trades in a range, leaving the options being traded to expire with no value on expiration day. These types of trading range markets are ideally suited for the iron condor option trading strategy.

You can imagine the iron condor strategy trade as a purchased strangle and a sold strangle. ‘Strangles’ can be both bought and sold and it is a trade where both a put and a call option is purchased some distance away from where the underlying is trading at. The premiums a trader can expect to take from a strangle position will be less than a straddle due to the fact that the options being sold are some distance away from ‘at the money’. A different way to imagine the iron condor option trading strategy is to think of it as 2 credit spreads – a bull put spread and a bear call spread. The long calls or puts above and below where the short options are placed at are the wings.

For example, let’s take a look and we find that the SPX is trading at around thirteen hundred and so we buy the jan call option at 1375 bringing in right around $245, and at the exact same time we buy the january put option for $4.38. If you are working with an options friendly broker – the required margin will be the difference between the two strikes – or the difference in the spread. In this example you would need around thirteen hundred dollars or so for this spread trade.

The calculation would be:

1380 at $2.45

1350 at $4.00

That’s around a credit premium that has been brought in of around two dollars or so.

$15 dollars minus $2 dollars = Thirteen – then times this by one spread (100 contracts) equals about $1,320.00 dollars.

Just as long as the underlying stays below the short strike levels the entire credit that was pulled into the account can be kept – which can be a very good short term return.

This is the call side spread of the iron condor trade we are referring to. To finish off the iron condor completely, you would need to add another credit spread – a put credit spread – down below.

This trading strategy can work wonderfully if you know what you are doing and the market conditions are right – and there are some option traders who use it as their primary trading strategy. But it’s not without its potential pitfalls and dangers.

Knowing which stock or index to use – as well as knowing how and when to properly place, exit, manage and adjust the iron condor is essential. And perhaps the most important of all of these is understanding how and when to correctly manage and adjust the position. If you don’t understand this strategy fully – or if you have a game plan that you will follow strictly – could be your downfall and wind up costing you significant losses. I know this from first hand experience.

To discover how to acceptably trade the iron condor methodology for steady monthly income, visit this iron condor site and catch our Free Video and get our Free Report.

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Trading Iron Condors – Riding The Iron Condor Spread Trade To Bring In Option Cashflow

May 12, 2012 by Ted Nino  
Filed under Investment

A number of different techniques and strategies are available to option investors to help assist them in achieving consistent and reliable monthly income from the option market.

For example there is the butterfly spread, the iron condor , the diagonal (an/or the double diagonal), and the calendar spread, the double calendar spread – and, the vertical spread, which is sometimes also referred to as the credit spread.

The vertical spread (or credit spread) is a foundational trade that can be found in many other option income strategies. The iron condor spread is in actuality just two vertical spreads placed on either side of where the market is trading.

Also take a look at the butterfly. This strategy is comprised of verticals as well. One in the upper half of the position and one in the lower half. Also the iron butterfly is made up of two credit – or vertical spreads. A put vertical and a call vertical – both sold at a credit.

The vertical spread trade can be built from either call options or also put options.

Following is an illustration of a bear call vertical spread on the imaginary stock XYZ…

Sell 5 RIMM 50 Call Purchase 5 RIMM 50 Call

The vertical spread in the example above is a bearish position. Our hypothetical trader who placed this trade believed that RIMM would be moving lower – or staying in it’s general vicinity on the chart.

Some might think that because we are using calls this should be a bullish position, however this is not the case since we are selling the option that is closer to money, hoping to capture the time premium in the event that the stock moves down.

As long as the outlook on this trade is correct and RIMM stays where it is at or heads downwards, this trade will ‘win’ and the initial credit received when the trade was first placed will become the profit. Also keep in mind that this strategy can be used with both call options and put options at the same to build what is called an iron condor trade.

Want to find out more about how to trade the iron condor for monthly income, then visit Ted Nino’s site on how to trade this strategy as well as the iron condor for monthly cashflow.

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The Iron Condor Strategy – Firing The Option Iron Condor To Reap Option Returns

May 10, 2012 by Ted Nino  
Filed under Investment

The iron condor has two faces (and I thank the good lord above that neither one of these faces belongs to Babs – but then again, perhaps it’s even worse)

Usually when the iron condor and the new option trader meet, the iron condor comes across as this amazing beautiful trade – a holy grail type of method that almost guarantees success with every single trade. A spread that only takes a few minutes every month to put on and manage – and one that spits out consistent cash like a broken Las Vegas slot machine.

Of course, new option traders go gaga over this strategy – and who could blame them. It seems to be a trade that’s almost too good to be real.

And sadly, sooner or later (mostly sooner) they discover that it IS too good to be true.

But it doesn’t have to be that way.

See, the iron condor IS a magnificent trade – and it DOES take very little time to manage – and it CAN kick off outstanding returns.

BUT – and a big but here – what the gaga eyed option trader who is so head over heels in love with this trade doesn’t yet realize – is that this strategy can get a nasty streak every now and then that if not properly handled can completely annihilate all those amazing returns our unsuspecting trader manage to rack up. And then some…

It all boils down to the risk to reward ratio of these trades. They have a high probability of winning many small trades – but just ONE loss can completely DESTROY a trading account. And if the one trading these birds don’t realize and fully understand this – and more importantly how to properly manage these trades and how to make effective iron condor adjustments – before long they will get creamed and blasted out of the market possibly with a huge, unrecoverable loss.

But again – it doesn’t have to go down this way. The iron condor can be tamed – and trained – to produce consistent and reliable monthly income – even through the occasional one or two tantrums and fits it might throw around every year. The key is to learn how to correctly manage these trades from the get go – from the day they get put on – AND – how to utilize the various iron condor adjustments that are available to keep these trades profitable and from getting out of hand in whatever market condition. Learning iron condor adjustments is the KEY.

To find out more about the iron condor technique, visit this training website for scores of free training videos, examples, and tutorials on how to properly start off, exit, negotiate and adjust the iron condor strategy to yield a steady monthly profits.

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Iron Condor – Here Comes The Pain

May 6, 2012 by Ted Nino  
Filed under Investment

In order to properly trade the iron condor, you need to have a game plan in place first regarding adjustments. Before you even think about what strikes you will use you should have this management plan already in place. If you don’t you could get utterly destroyed by a big move in the market or the underlying and you wouldn’t have a clue what to do. Remember, the way that the iron condor is set up, with it’s skewed risk to reward ratio, it could take a few of these – or maybe even just one – to utterly destroy your trading account.

Another way of looking at the iron condor is to view it as a sold strangle with purchased wings on the outer edges for protection. The strangle trade is an option trade where the one who is putting the trade either buys or sells an out of the money put and call on either side where the stock being used is trading at. Strangles’ premiums are less than those of straddles due to the fact that the contracts are out of the money. This is basically just a call option spread up above where the stock is trading at, and a put option spread position down below where the underlying is trading at. Your paired positions are the condor’s wings.

The reason it is so important to have a sound management plan in place before such a move is due to the risk to reward ratio that the iron condor strategy carries with it. By finding a way to put the probability factor of this option trading strategy in our favor we can use that to help us be much more successful with this trade. A big move either way – or even just a move in the underlying that is larger than you were expecting – can have disastrous results on your trade and your profits.

The Keys to Successful Iron Condor Strategy

- Know that there are different ways for adjusting iron condors. There isn’t a ‘particular’ way you you need to do so. 


- Protecting your profits and your account should always come first. 


- Never allow the inevitable small losses to morph into big losses. 


- Don’t get bored with taking small consistent wins.

Your key to success in trading this strategy is consistency in gaining profits. These profits must be protected. Adjusting iron condors must be done according to one or more pre-planned strategies whenever the possibility for a large loss looms.

I always used to make great monthly returns trading this strategy for a number of trading cycles in a row – but somehow always seemed to give it all up during the few volatile months that always seem to come along in a year. BUT – all that changed after I discovered this very simple to follow step-by-step method of adjusting iron condor positions. After discovering the methods taught at this iron condor website, I now know exactly what to do when a problem month comes along to keep from losing the rest of my iron condor profits I’ve accumulated throughout the year.

Ted ‘The Spread is an option selling zombie – particularly fiery with riding the iron condor . Visit his iron condor Trading Site to see more about his First-rate Smooth Plan to maneuver the weeklys for reliable profits.

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Iron Condor – How To Lose Your ENTIRE Trading Account Quickly

October 10, 2011 by Ted Nino  
Filed under Investment

The Iron Condor is perhaps the most dangerous option strategy around.

The thing is, when rookie option traders first hear of this strategy (perhaps from a late night infomercial or free hotel seminar conducted by slick salesmen touting it as the greatest thing since sliced bread) – very few seem to able to resist the temptation to jump right into trading them head first – with actual real hard earned money on the line – and usually way too much of it.

And it seems that a good percentage of them – if not most of them – promptly wind up getting their groins kicked in, their heads ripped off, their eyes poked out, and getting hurt really, really bad.

Now wait -

Before you start to get the wrong impression, please, let me clarify something here.

I absolutely LOVE iron condors. ALOT. In fact, the iron condor is right up there as one of my favorite trading strategies.

I think the iron condor really IS a great trade.

And yes, I absolutely believe all those stories and claims you hear swirling around about iron condors generating ten percent plus monthly returns and providing trades that have the probability of winning somewhere in the range of eighty to ninety percent. In fact, I KNOW those stories are true because I see it happen all the time in my very own trading account.

The problem is – there is something big that is being left out of all those claims and stories – and this something is causing way too many fresh new doe eyed option traders to misunderstand this strategy right from the beginning and blindly jump into them with completely wrong expectations.

See, while it may be true that the iron condor and credit spread strategies can kick off yields of over ten percent monthly and that they favor the trader by offering high probabilities of winning (in some instances as high as 80 and 90 percent) – what isn’t being talked about is the risk to reward ratio of these trades – which can be as high as 10 to 1.

10 to 1! That means that in order to try and make just one dollar, you need to be willing to risk ten. Or, put another way – in order to make 100 dollars, you need to risk 1,000 dollars. Or – risk $10,000.00 to hopefully make just $1,000.00!

And as my dear old mammy used to say: ‘that smells a lot like an awful bad egg’. Which in fact it is. That risk to reward ratio is nothing but a low down, no good, smelly rotten deal!

Even with the ten percent monthly returns and the high probabilities – all that needs to happen is for a problem month to come along (and it WILL, believe me) – and the next thing you know you’ll be staring at a gigantic loss and a zero balance account!

However…

There is still hope…

Like I said before, I LOVE the iron condor trade.

And – I consistently make money from it.

So apparently, even with that atrocious risk to reward quandary, there must be a method to generate consistent income with this trade.

And there absolutely is.

It all has to do with the management of the trade.

As long as you learn the correct way to initially place these trades, then combine that with a super simple management technique and a few easy adjustment tricks – this risk to reward issue can be completely eliminated and no longer presents a problem.

Once you possess the correct iron condor knowledge and know how – and understand how to apply a couple super easy to implement adjustment tricks – you’ll know exactly how to exterminate any problematic market threat that comes your way, allowing you to experience the iron condor trading strategy for all that it’s ‘actually’ cracked up to be.

To learn these ‘tricks’ to trading the Iron Condor , go to this Iron Condor site and watch my free video. It will show you an extremely simple method for properly placing, managing, and ADJUSTING iron condor trades.

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