For all the investors out there who can’t pick market direction to save their lives, here is a good trading strategy worth considering: it’s called the iron condor Option Strategy. This trade is ideally suited for non trending markets, however it can also product great results in a moving market just as long as the investor who is trading this strategy understands it thouroughly and has been properly educated on how to work the trade and most importantly how to correctly adjust.
The iron condor is a trade that benefits from the reality that options are a wasting asset – an investment vehicle that slowly drains value as time passes by. These trades will profit just as long as the strikes which have been sold remain outside the range that has been created on the iron condor profit graph when the trade was first initiated. And these trades can kick off a good and solid return on investment in quick periods of time.
Two individual credit spreads make up an iron condor. Each credit spread is placed above and below where the stock or index being used is presently trading at. Above the underlying is a bear call spread. Below is a bull put spread. This trade can be initially placed either as one whole iron condor spread – all four legs together – or as separetly placed credit spreads.
Ideally, the stock or index that is being traded will remain within the range created by the two separate credit spreads. These are usually placed far enough away from where the underlying is currently trading where as to give the underlying room to move around on the chart without breaching either one of the spread positions on both sides. If the underlying does move so far as to threaten either credit spread, the iron condor trader will need to have a plan in place to protect the position by managing and making adjustments to the position.
Most of the time, iron condors can be profitable as they offer a high probability of success. That being said, it is extremely important for the newer iron condor trader to understand the potential danger of these trades as the reward/risk ratio is very poor. One losing trade can completely destroy a trading account and eliminate many months worth of gains. This is why it is so important to have a solid iron condor management and adjustment plan in place before getting started trading this strategy. These can absolutely be profitable over the long run IF one knows how to correctly place, manage and adjust.
Many iron condor traders grow over confident because they win for a number of consecutive months using this trade. Then they are woken up as the inevitable problem month comes along and destroys a significant portion of the their trading account. This could have been averted if they had only properly prepared before hand and learned how to correctly place, exit, manage and adjust these trades.
Had I first learned just a few of the simple iron condor adjusting tips, tricks, and simple management techniques found at this iron condors website, I could have remained profitable even with the rest of the market crashing all around me.
To discover these ‘tricks’ to trading the iron condor , to over to this iron condor website and see my free video. It will depict an very down-to-earth idea for suitably placing, managing, and ADJUSTING these types of trades.