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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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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Trading Weekly Option – Romancing The Spread Trades To Create Weekly Options Returns

December 19, 2011 by Ted Nino  
Filed under Investment

Standard call options was first introduced in 1973. The standard call options was born because of the CBOE or the Chicago Board Options. Put option become available into the market after the standard call options took place. The put options became very popular. Their popularity was manifested in the increase of trading volume which actually increases at a compound annual rate of growth over 25% between the years 1973 and 2009. The significant increase really portray that the investors know how to deal with the options. The overall increase was brought about by the familiarization of the investors on using these options.

The Chicago Board Options Exchange brings a new class option called Weekly Options in year 2005. Thirty two years after the first introduction of call options weekly options were introduced. The weekly options were called by investors as “weeklys”. “Weeklys” can be compared to monthly options by the investors. Weeklys only last for eight days while monthly options are not. The weekly options are introduced every Thursday and eight days later, Friday of the following week, they expire. Monthly options has twelve monthly expirations and expires every third Friday of the month. Weeklys per year has at least fifty-two expirations.

Options can be implemented with various strategies. Different tactics are currently available according to your chosen options. What are the best techniques for weeklys? With the case of weekly options, you can do just about any strategies that you actually use with longer dated option or monthly options. You may notice that these techniques can be done four times monthly for weeklys. While for monthly options, it can be only done once.

Investors are taking advantage of the final week of an option’s life. Having many time decay curves is one of the advantage of using weekly options. Investor earn twelve times when considering monthly options. Weekly option investments are given fifty-two times payment per year.

You may use the same strategies (like the Calendar Spread) for monthly and weekly options. You can sell naked puts and calls. Condors, spreads and covered calls are typical strategies that can be use for options. These strategies work well with the weeklys and also with the monthlies. The only difference is that they have a shorter time line.

To study how to appropriately trade Weekly Options Methodology for ongoing monthly earnings, go to this Gamma Scalping website and catch our Free Video and download our Free Report.

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Playing Weekly Options – Riding The Option Spread To Net Weekly Options Gains

December 4, 2011 by Ted Nino  
Filed under Investment

The Advantage of Weekly Options

Short-term advantage can be derived from Weekly Options than monthly options. Being a short-term investment, weekly option provides its investors the freedom to anticipate price changes and movements.

For instance, investors can make specific investments on EFG stock because it would be better financially on a certain week. Going into a monthly option can be risky and your three weeks worth is at stake for that investment. Weekly option can be advantageous on minimizing risk since investments’ duration is limited. Weekly options can still be a viable option because it saves your money and provides good return if correct investments were chosen.

Most of the time, monthly option open interest and volume is higher than with weekly options. Monthlys have better pinning action than weeklys. Pinning action is an event when a price of stock went up due to a strike price on its expiration day.

Disadvantages of Trading The New Weekly Options

Of course, weeklys has its own disadvantages. One disadvantage is its short duration and quick time decay. There is no much time to fix mistaken investments. You will have a difficulty in adjusting your strikes or do some kind of mean revisions in the underlying security. Another thing is that not all of the strikes in the weeklys will have good open interest and volume. The strikes may bring extended effects that are not beneficial for short-term strategies.

Wrap Up

Investors of weekly options should know its advantages and disadvantages – especially when getting involved in Gamma Scalping. Investing on this kind of instruments may provide profit or loss. Investors should have full understanding of what they are doing and the risks involve in order to be successful.

To discover more about this Weekly Options method, click over to this Butterfly Spread Training Website for dozens of free training videos, samples, and tutorials on how to fittingly start, exit, handle and adjust Gamma Scalping Strategies to create a reliable monthly income.

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Butterfly Spread: Churning Out Monthly Cash Flow

October 23, 2011 by Ted Nino  
Filed under Investment

A great system for option traders who feel the underlying instrument they’re working with will probably be range bound for the next 2, 3, or 4 weeks of time or so is the butterfly spread .

This theta positive option strategy produces profits when the stock or index that is being traded remains within a contained range on the graph or ends up on expiration day at or near the short strikes of the trade.

Here is an illustration of this tactic:

Buy 5 contracts of SPY 100 calls. Sell 10 contracts of SPY 105 calls. Purchase 5 contracts of SPY 110 calls.

These trades can generate quick gains for the investor as a result of the short strikes in the position (the strikes that have been sold) providing so much premium into the traders account. This is because the strikes that are usually sold in these trades are the ‘at the money’ strikes – or the strikes that reside closest to where the underlying is actually trading at when the trade is first put on. The ‘at the money’ strikes always contain the most amount of time premium, which is what option traders are looking to benefit from when trading these type of income positions.

While you can find numerous mutations of the butterfly spread, the two most popular are the standard butterfly distribute which is traded for a debit, and then there’s the iron butterfly, which is put on for a credit. It is true that these two individual versions of the butterfly spread are indeed different, if you would look at the risk graph of one and then compare it to the other, they would look exactly the same, and they actually perform the same as well.

The butterfly option strategy is a ‘delta neutral’ strategy, meaning that investors who use this technique do not have an opinion on market direction or believe that the underlying being traded will remain in its general location on the chart for the duration of the trade.

With the proper knowledge, the butterfly spread can be a lucrative, low pressure, and pleasant investing system that doesn’t require one to be glued to their computer screen stressing out over every tick of the market all day.

To find out more about this strategy, visit this Iron Condor Training Website for tons of free training videos, examples, reports and easy step by step instructions on how to trade the Butterfly Spread to generate a consistent income.

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Double Calendar: What Goes Down Must Go Up

October 18, 2011 by Ted Nino  
Filed under Investment

Even though Double Calendar Spreads can be utilized in various stock market circumstances, they function finest in low volatility situations. Increasing volatility levels help these trades, while sinking volatility winds up hurting them.

Mainly because calendar spreads churn out profit the fastest at neutral to rising volatility levels, some calendar spread traders will wait to make a trade right up until an underlyings volatility either reach the lowest level of their average range, or until they move into the lower third area of their normal volatility range.

By waiting for these lower ranges, the calendar spread trader is increasing his or her odds that the volatility levels will either remain wherever they’re and not go much lower which could wind up hurting the trade, or will start to rise back up which could put their calendar trade into significant earnings pretty swiftly.

Typically volatility levels move down because the marketplace heads upward and volatility levels go up because the marketplace moves down. This is why calendar traders will usually put on calendar spreads when they have a bearish view on the stock market or on the underlying asset they are trading.

A popular method for option investors with a bearish outlook is to place a calendar spread slightly below where the market or stock is trading at, with the expectation that as the market or stock does head downward, not only with the underlying move directly into the sweet spot of their calendar position, but the volatility will also rise, super charging their calendar trade into a very good profit.

This method can also be used with double calendars, and in fact many option traders would argue that it would be preferred. Using a double calendar could increase the probability of taking profit from the trade as it could be placed with a skew that would not only create a wider sweet spot inside the profit tent for the underlying to get caught in, it could also supply an extended profit tent coverage over the area where the underlying is trading at when the trade is first initiated, providing a safety net if it turns out that the traders speculation on direction turns out to be incorrect.

To find out more about double calendar , visit Ted Nino’s site on how to correctly enter, exit, manage and adjust a calendar spread trade for consistent income.

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Butterfly Spread – Milking The Butterfly Spread For Consistent Bling

October 16, 2011 by Ted Nino  
Filed under Investment

The butterfly spread trade – with is a trade made up from puts and calls , is a preferred strategy with option income enthusiasts. Not only does this trade give the trader a substantial quantity of premium at the start of the trade which might be parlayed into an important monthly cash flow, it also provides an extremely effective position structure which can put up with and tolerate a variety of trading circumstances, including particularly volatile situations like the ones we are seeing now. In a wild stock market exactly where a lot of other option methods do not have a chance, the butterfly spread may be put on and if appropriately monitored, come out smelling like a rose.

When you look at a risk graph of the buttefly spread, you will see that the butterfly payoff is tremendous – specially when analyzed side to side with other option income methods – for instance the iron condor, the credit spread, the diagonal, double diagonal, the calendar, double calendar, and so on.

Depending on exactly where the wings are placed on these trades, or to put it differently, how close or far the long options are puchased in relation to strikes sold, it’s possible to develop a butterfly trade where by the possible reward is numerous times more than the danger taken on.

Nevertheless, in the occurances where the reward is numerous times greater than the risk being assumed, it is due to the fact that the wings that are being purchased are incredibly close to the strikes being sold, creating an incredibly tall yet really narrow ‘profit tent’ which the underlying has to remain inside of to realize that massive payoff – which the odds will probably be incredibly low.

Even so, if the underlying remains inside the overall space of this tall, narrow profit tent – plus the trader does not plan to stay with the trade all of the way until expiration day – a good earnings can still be extracted from these lower probability straddles trade as the zero day income line on the risk graph soars up pretty rapidly and a first rate return is usually grabbed within a short level of time.

Ted Nino is an option selling evangelist – particularly fanatical about trading straddles , the Double Calendar, the Credit Spread, and the Butterfly Spread. Visit his puts and calls Blog to learn more about these option strategies.

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Credit Spread – Oh Man, I Want My Mommy…

October 12, 2011 by Ted Nino  
Filed under Investment

The Credit Spread Option Trading Strategy is perhaps the most dangerous option strategy around.

The thing is, when rookie option traders first hear of the credit spread – very few seem to able to resist the temptation to jump right into trading them – with too much real hard earned money on the line – and not nearly enough education.

And unfortunately what always seems to happen to a high percentage of them is that they promptly wind up getting their trading accounts demolished and their heads handed to them on a platter.

Now wait -

Let me explain something here before you start to get the wrong impression.

I absolutely LOVE credit spreads. ALOT. In fact, the credit spread is right up there as one of my favorite trading strategies.

I think that the credit spread really IS a great trade.

And yes, I absolutely believe all those stories and claims you hear swirling around about credit spreads 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 credit spread and iron condor 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.

That means that while trading these trades you are putting at risk 10 bucks for the chance to make just 1. Or – in reality, in the instance of say a standard ten lot index iron condor, you are risking ten thousand dollars for the chance to make just one thousand dollars.

And as mammy used to say to us kids – ‘that ain’t nothin but a real awful bad egg’.

Just do the math. With a risk to reward like that, even with the great probabilities and wonderful monthly returns – before long a problem month could come along and completely wipe out your entire account!

But…

All isn’t lost. There IS hope…

Because – as I wrote previously – I REALLY DO like the credit spread strategy.

And – I consistently make money from it.

So obviously there’s a way around that horrible risk to reward issue and the inevitable problematic losing months.

And there absolutely is.

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

As soon as you discover the ‘right way’ to place these trades initially – and then how to properly go about managing and adjusting them – that risk to reward dilemma instantly vanishes and goes away.

Once you possess the correct credit spread trading 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 Credit Spread strategy for all that it’s ‘actually’ cracked up to be.

To learn these ‘tricks’ to trading the Credit Spread , go to this Weekly Options site and watch our free video. It will show you an extremely simple method for properly placing, managing, and ADJUTING credit spread option trades.

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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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