Tag Archives: Iron Condor

The Secrets to Locking In Profits for Option Traders

Today, I had an interesting conversation with an option trader who is still searching for the magic formula to making consistent returns with option trading. He said many things which were so familiar to me.

The thing in particular that really stood out to me was when he alleged “Non-directional option investing doesn’t mean we will produce a return on investment in every direction. It really means that we produce a return if the asset doesn’t move in any direction. Another way to look at it, it’s really a directional strategy, sideways.” This is very true, and most schools say that it’s easy to manufacture returns with options simply because we can produce money for every direction the market goes. This is true in some points of view and false in others.

Those investing with Condors understand what I am saying, especially if you are investing in the Iron Condors which most programs and written materials preach. If you are investing with this option strategy during 2008 and 2009, you most likely aren’t doing much good. The reason for this is that the Iron Condor is just as directional as other option positions only that its direction is called “Sideways.” For most traders, it’s just as difficult to forecast a neutral move as it is to predict an upward move or downward one.

I have had many calls over the years from people losing huge chunks of their accounts trading credit spreads and condors. They all say the same thing… “I was doing great for several months, and then all the sudden I lost nearly my whole account in one day.” I have heard this story over and over again.

This is the reason why I don’t push the popular Iron Condors, Bear Calls or Bull Puts. If you are a couple days from expiration, and the RUT is really near the sold strike, then at that moment you are in a very risky position. I’ll remind you that this is the same risky method that many other investors are using to manage this option spread. Shortly all of your friends will be hearing the same story, but you won’t be sharing this news with your wife! You smile at the moment, but you won’t be if it happens to your trading portfolio. Another sad thing about this investing style is that the fear level is so astronomical that it really hurts your personal life. It makes it tough to sleep or even just relax each day.

Anyway, to deal with this problem San Jose Options Mentoring has redesigned Iron Condors and Credit Spreads. We have a different technique which gives the underlying much more wiggle room, lowering our stress level and keeping us out of dangerous situations. Remember, the less you have to adjust your condor, the better off you will be in most cases.

Besides teaching a safer way to trade Condors, we’ve also developed techniques to lock-in our profits on them. Most option traders exit their trades when they make a profit, but we can lock-in our profits and stay in the trade.

There’s yet another technique we’ve developed that I’d like to mention before we go. Every trader has some trades that don’t work out right? Well we obviously do too, but in our case, we usually end up with a Bonus Trade which gives us a chance to make back our loss with very little or no risk at all. It’s these little details to trading that make all the difference at the end of the year.

So there you have it! Whether it’s a winning trade or a loser, we have really developed some nice trading tactics that can improve your personal trading immensely.

Ready to lock in those profits? Better your Option Trading Skills today by visiting San Jose Options Mentoring online at www.sjoptions.com. Visit today and get a Free Video on Option Greeks, a $200 value absolutely free!

Iron Condor – When To Take Profits

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 I’ve changed my game plan since then.

After spending far too many nights worrying and not being able to fall asleep – along with a lot of expiration day close calls – painful ulcers – and a near hernia or two – I’ve altered the way I manage my iron condor trades.

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.

Crazy?

Personally I don’t think so.

Sure I might make less than if I tried to milk them all the way through to the very end.

But as you will see – that’s not necessarily correct.

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 (at least for me) – is that by closing my iron condor trade early, I have LOCKED IN FOREVER the majority of the gains on that side of the trade. And no matter what happens going forward – those gains that I’ve just banked CAN’T be taken away from me.

I have also lessened my exposure.

AND – I also now have the ability to generate ADDITIONAL profits from this iron condor position – more than what was possible when I originally placed the trade. And I can generate this additional profit in the trade WITHOUT an increase in the trades original risk.

Let me show you what I am talking about here:

Option premiums can decay quickly. Really quickly. As a matter of fact, I’ve seen them almost drain completely over the course of just a few days.

Going back to our example – let’s pretend that I put an iron condor on about 40 days until expiration. For the trade I receive around a 1.00 credit. Fifty cents for each credit spread on either end of the position.

The day after I place the trade, our stock – XYZ – all of a sudden turns south – and proceeds to move down over the next 3 or 4 days.

Four days after I initiated the trade, I discover that I can now purchase the call credit spread of the position for just ten cents.

If I do nothing, I am choosing to risk that CALL spread margin for the next 36 DAYS for a measly $10.00 of remaining profit (per spread).

But – if I instead just spend the ten measly bucks to pull off that upper credit spread – I will LOCK IN the majority of the profit that was available in that spread – and earn a great return on investment in just four days.

Then, if XYZ bounces back up – which it will often do after a drop – I no longer have any risk on the upside.

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 of course I don’t have to resell any spreads. Let’s just say I repurchase them at ten cent to take off whole iron condor trade. What have I done? I’ve diminished my risk – I’ve freed up my trading capital – I’ve increased my ‘return on investment’ over number of days in the trade – and I’ve exited the market much sooner than I would have had I stayed in the trade all the way to expiry. And to me, all of these things are GOOD things.

This allows me to totally get away from trading for a few days – or weeks (or however long until the next expiration cycle starts) – and enjoy the other things in my life without having to always be wondering what’s happening to my trade – or the market – or worrying about the next big crash.

And being able to temporarily take some time to ‘get away’ from the game – from the iron condor and ‘option trading’ and ‘vega’ and ‘adjustments’ and ‘theta decay’ – to be able to go out and do other things during market hours without always feeling the need to check quotes on my phone to see what the market is doing – and just having the opportunity to fall into bed at night and sleep like a baby without a care or worry about whether or not there will be a huge gap tomorrow morning at the open…

That’s priceless.

Or – at the very least, it’s DEFINITELY worth the.20 or so it costs me to exit early out of the trade…for what is STILL a remarkable monthly profit.

Ted ‘Spread’ Nino is an option selling wild man – exceptionally enthusiastic about trading the iron condor . Go to his iron condor Site to find out more about his easy paint by the numbers system for riding this strategy for dependable returns.

How To Use Option Trading Strategies Efficiently

Bullish strategies are usually employed by traders when the price of an underlying asset is expected to rise. Bearish techniques are considered to be appropriate when the movement in price is predicted to be in the opposite direction. Neutral techniques are applied when a trader is not sure about the direction prices will move. Option trading strategies can be used for hedging a traders’ position or for making profits on stock price movements.

Bullish techniques are usually employed if a dealer expects the share price to move upwards. Many bullish techniques can be used to make profitable trades. Aggressive, moderate and mild techniques can be applied on the basis of a traders’ expectation of price rallies within a time frame.

Traders can also make profits from a downward movement in the value of an underlying asset, if they can predict it correctly. Aggressive, moderate and mild bearish approaches can be used to good effect within the expected time limit of a fall in value. Dealers have to be assured they can correctly forecast how steep the fall in value will be.

When traders cannot predict how a share price will move, they employ neutral (or non-directional) techniques to secure their position. In these situations, the price volatility of the underlying determines a traders’ profitability. Neutral techniques like guts, butterfly, long straddle, short straddle and strangle are used by traders in these sensitive scenarios.

Many neutral techniques are bullish or bearish on volatility. Bullish on volatility techniques are profitable when an assets’ share price makes changes significantly. Bullish on volatility techniques includes short condor, short butterfly, long strangle and long straddle. While, neutral bearish on volatility techniques are profitable when an assets’ price has little or no volatility. Bearish on volatility techniques includes short straddle, long butterfly, long condor and the short strangle.

Option strategies are not only employed for making profits on the movements in the value of underlying assets, but also for hedging a dealer’s position. Option trading can help a dealer to reduce his/her risks by going long and short on the same underlying asset. A combination technique is employed by a trader when these simultaneous contracts are purchased on the same asset.

In conclusion, options techniques support different movements in underlying assets that can be bullish, bearish or neutral. Neutral techniques can also be bullish or bearish on volatility. It is best to seek professional advice for detailed guidance when considering the use of option trading strategies.

There are numerous proven option trading strategies that traders can use for completing profitable trades in the market. High probability trading is the target for every trader and is possible with the right techniques.

Making Profits By Trade Profitably By Using Option Trading Strategies To Great Benefit

Option traders employ bullish techniques when they expect an upward movement in an underlying assets’ share price. A bearish technique is considered suitable when the stock price is predicted to fall. Cautious traders apply neutral techniques, when they do not know the direction in which an asset share price will move. Option trading strategies help traders hedge their position and make profits from asset price movements.

Bullish trading techniques can be employed when a trader believes the underlying stock price will move up in the foreseeable future. The technique chosen would depend on the traders’ assessment of the time line within which a rally will occur and the expected increase in the underlying share price. Bullish strategies are aggressive, moderate or mild.

Traders can also make profits from a downward movement in the value of an underlying asset, if they can predict it correctly. Aggressive, moderate and mild bearish approaches can be used to good effect within the expected time limit of a fall in value. Dealers have to be assured they can correctly forecast how steep the fall in value will be.

Traders employ neutral options strategies (or non-directional) when they can not predict whether an underlying share price will go up or down. The ability to make a profit in these situations is not dependent on the upward or downward movement of the underlying assets’ valuation. Instead, it is dependent on the estimated volatility of the assets’ price. Neutral techniques include guts, butterfly, and straddle (long and short) and strangle.

Bullish on volatility and bearish on volatility techniques are a further breakdown of neutral option techniques. In highly volatile scenarios, bullish on volatility approaches such as the long strangle, long straddle, short condor and butterfly will meet traders’ strategic requirements. Bearish on volatility techniques like ratio spreads, long condor, short straddle and short strangle would help a dealer make the most of a little or no movement in price.

Trading approaches can also be used to hedge traders’ positions. Thus, reducing traders’ vulnerability by purchasing simultaneous long and short contracts of the same underlying asset. These approaches are also known as combination strategies, because they involve applying multiple leg structures to reduce risks.

Option trading strategies can support various movements in the value of underlying assets. A dealer’s expectation of the future would determine which technique he/she will apply in a scenario. However, it is advisable to seek expert guidance for clarity.

There are many tested option trading strategies that traders can use for making profitable trades in the market. High probability trading is the target for every trader and is possible with the right techniques.

The Iron Condor Option Trading Strategy – The Most Account-threatening Weekly Options Trade In The Entire World

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.