you can manage sells like in a stangle, buy back calls when stock goes down, and buy back puts when stock goes up again, follow the price, never have a max loss
Great video. I have a question thou. In the example trade #3, if I want exit my position at $485, what would I have to do? Buy stock at market rate, sell it at $535 by exercising long put, and let the short put, short call and long call to expire. Is that correct? Thanks.
I was setting up hypothetical long condors and messing around with the different strike prices on the shorts of the long condor and it looks like the farther otm you set the shorts the better reward to risk you get on the trade. It might be the tastyworks platform not working correctly, but other than that what's the down side to setting the otm shorts further out of the money? The max loss amount barely goes up compared to the max profit
Chris, What worry is there of short call or short put assignment when the longs are closer to the money and will go in the money first with a LONG IRON Condor? Call me confused.
Siddhesh, The margin requirement for a long iron condor will be the debit paid x $100 (for standard equity options). In other words, the margin requirement is the trade's maximum loss potential. For example, if you pay $2.50 to enter an iron condor, the maximum loss is $250 per iron condor ($2.50 x $100). Therefore, the margin requirement is $250 per iron condor. I hope this helps! -Chris
Thanks Chris for a lightning quick response, I hope I am not disturbing you with your trades just want to know In case of weekly options the margin amount would be much less compared to the monthly option? This type of margin is calculated by all brokers or by a particular broker?
No problem at all. The margin calculation I've provided in the previous response should hold true at all major brokerage firms, as the loss potential on a spread is known before the trade is entered. In regards to weekly vs. monthly options, it doesn't matter. If you pay $2.50 for a weekly iron condor vs. $2.50 for a monthly iron condor, the margin requirement will be the same (assuming the weekly and monthly options are all standard equity options with a $100 multiplier). I hope this helps! -Chris
You can use Yahoo! Finance to see the options in each respective expiration: finance.yahoo.com/quote/MSFT/options/ I'd highly recommend downloading trading software from a brokerage firm to see the options instead of using Yahoo.
In the Long Iron Condor, for it to be profitable either the Long Put or Call will be ITM...so the chances of Assignment is very less...am I correct to say that...
For the position to be profitable at expiration, the stock price needs to be beyond one of the breakeven points (long call + premium paid OR long put - premium paid). The probability of assignment is very low with a long iron condor because one of the short options would need to be deep in-the-money. In general, traders do not need to worry about being assigned on short options unless they are deep in-the-money. And, if you were assigned on a short option that had lots of extrinsic value, that would actually be a good thing. -Chris
Would a long iron condor say 30 dte make sense post earnings? I usually go with short iron condors as earnings plays to take advantage of the drop in IV. But what about after IV has dropped dramatically. Would a long iron condor be more appropriate for that situation?
Very good video. I'm in a losing position, "Sea of Death" of a long Iron condor with 3 weeks to expiry. How can I adjust or roll the trade in hopes to minimize the P/L? Thanks
Yes, it's called a "condor." If you shorted an ITM call spread and purchased an OTM call spread (using the same strikes as a call/put iron condor purchase), then you'd get the same position (virtually). Example: Buy 100 put, short 90 put, buy 110 call, short 120 call (Long iron condor) Instead, you can: Short 90 call, buy 100 call, buy 110 call, short 120 call (short condor). However, I wouldn't advise setting it up like that. Using all OTM calls/puts is cleaner than shorting fully ITM spreads.
Hey Chris thanks a lot, it seems to me that Long Iron Condors are a good strategy during earnings when a big move is expected to either side, what other scenarios would be a good fit for a Long Iron Condor Option strategy?
Hi Carlos, I don't ever buy iron condors as most of the time the strategy will lose money, as mentioned in the video. Since the market expects a potentially big movement after a stock's earnings report, buying an iron condor will be an expensive trade to make, and will lose money if the stock ends up not moving. I would say buying an iron condor is only a good strategy if the trader is indifferent on price direction, but is expecting either a big movement in either direction in the near future, an increase in implied volatility (essentially an increase in what the market expects from the stock's future price movements), or a combination of the two. Again, I don't think I've ever bought an iron condor and probably won't use the strategy in the future because it is a strategy that requires precise predictions to work out in your favor. From my own experience, having to predict short-term stock price movements to make money doesn't usually work out too well. I hope this helps! Let me know if you have any follow-up questions. -Chris
A short iron condor would do much better for the earnings announcent due to the implied volatility crush. But a long iron condor might fair better the day after earnings when the options prices are much cheaper
Hey Chris, why would anyone want to place this position? I mean, we have already capped the profit potential but we have got the entire debit paid as loss potential? Correct me if I am wrong but, isn't the long straddle or the long strangle a better strategy, if at all we want to long positions since the profit isn't capped there? Also, since we are buying options in strangles and straddles we don't need exposure margins but here since we are selling options as well, we do need a higher margin then why would anyone place this position?
The spreads lower your initial premium a lot, and (without actually doing the math), I think strangles and straddles have to move farther into the money in order to be profitable.
Hi Elly, It's completely situational and everyone has a different method. I personally never buy Iron Condors so I don't have a system in place for selecting strike prices. However, many traders choose strike prices based on the delta values of each option at the time of trade entry. What matters is that you believe the stock price will move beyond one of your short strikes (or at least the breakeven point) of the position before the Iron Condor expires. Sorry I couldn't be more help here! -Chris
If a big move happens and the IC gets close to the max profit it makes sense to close it out since the trade can only make so much more money but has everything to lose
It was Amzn i have screen shots of it im not to sure what exactly i did wrong but i think i set my sell put higher than my buy put, one option was worth 7k and the other 2k and the other 2 were in the negatives, but i was still in the negatives, I dont understand the credit/ debit aspect nor how to set the limit price
It sounds like you sold an iron condor: 1) Buy a put option (Lower strike than sold put) 2) Sell a put (Below the stock price) 3) Sell a call option (above the stock price) 4) Buy a call (higher strike than call) The position makes money if the stock price doesn't move quickly towards either of the short strike prices. Check out this video for a visual explanation: ua-cam.com/video/YlAK2geFJ54/v-deo.html I hope this helps. -Chris
you can manage sells like in a stangle, buy back calls when stock goes down, and buy back puts when stock goes up again, follow the price, never have a max loss
How to avoid assignment , gap up or down during over night will assign the stocks automatically??
Great video. I have a question thou. In the example trade #3, if I want exit my position at $485, what would I have to do? Buy stock at market rate, sell it at $535 by exercising long put, and let the short put, short call and long call to expire. Is that correct? Thanks.
I was setting up hypothetical long condors and messing around with the different strike prices on the shorts of the long condor and it looks like the farther otm you set the shorts the better reward to risk you get on the trade. It might be the tastyworks platform not working correctly, but other than that what's the down side to setting the otm shorts further out of the money? The max loss amount barely goes up compared to the max profit
The first chart really helped 👍🏼
Chris, What worry is there of short call or short put assignment when the longs are closer to the money and will go in the money first with a LONG IRON Condor? Call me confused.
Great Video - What will be margin requirement for Long Iron Condor?
Siddhesh,
The margin requirement for a long iron condor will be the debit paid x $100 (for standard equity options). In other words, the margin requirement is the trade's maximum loss potential.
For example, if you pay $2.50 to enter an iron condor, the maximum loss is $250 per iron condor ($2.50 x $100). Therefore, the margin requirement is $250 per iron condor.
I hope this helps!
-Chris
Thanks Chris for a lightning quick response, I hope I am not disturbing you with your trades just want to know In case of weekly options the margin amount would be much less compared to the monthly option? This type of margin is calculated by all brokers or by a particular broker?
No problem at all.
The margin calculation I've provided in the previous response should hold true at all major brokerage firms, as the loss potential on a spread is known before the trade is entered.
In regards to weekly vs. monthly options, it doesn't matter. If you pay $2.50 for a weekly iron condor vs. $2.50 for a monthly iron condor, the margin requirement will be the same (assuming the weekly and monthly options are all standard equity options with a $100 multiplier).
I hope this helps!
-Chris
Thanks for your reply , Is there any exchange website where I can check the option chain for weekly and monthly expiry?
You can use Yahoo! Finance to see the options in each respective expiration:
finance.yahoo.com/quote/MSFT/options/
I'd highly recommend downloading trading software from a brokerage firm to see the options instead of using Yahoo.
In the Long Iron Condor, for it to be profitable either the Long Put or Call will be ITM...so the chances of Assignment is very less...am I correct to say that...
For the position to be profitable at expiration, the stock price needs to be beyond one of the breakeven points (long call + premium paid OR long put - premium paid).
The probability of assignment is very low with a long iron condor because one of the short options would need to be deep in-the-money.
In general, traders do not need to worry about being assigned on short options unless they are deep in-the-money. And, if you were assigned on a short option that had lots of extrinsic value, that would actually be a good thing.
-Chris
Would a long iron condor say 30 dte make sense post earnings? I usually go with short iron condors as earnings plays to take advantage of the drop in IV. But what about after IV has dropped dramatically. Would a long iron condor be more appropriate for that situation?
Very good video. I'm in a losing position, "Sea of Death" of a long Iron condor with 3 weeks to expiry. How can I adjust or roll the trade in hopes to minimize the P/L? Thanks
Could you please make a video how Greeks used to open long or short iron condor strategy
Can we create a long iron condor only using either calls or puts ?
Yes, it's called a "condor." If you shorted an ITM call spread and purchased an OTM call spread (using the same strikes as a call/put iron condor purchase), then you'd get the same position (virtually).
Example: Buy 100 put, short 90 put, buy 110 call, short 120 call (Long iron condor)
Instead, you can: Short 90 call, buy 100 call, buy 110 call, short 120 call (short condor).
However, I wouldn't advise setting it up like that. Using all OTM calls/puts is cleaner than shorting fully ITM spreads.
Hey Chris thanks a lot, it seems to me that Long Iron Condors are a good strategy during earnings when a big move is expected to either side, what other scenarios would be a good fit for a Long Iron Condor Option strategy?
Hi Carlos,
I don't ever buy iron condors as most of the time the strategy will lose money, as mentioned in the video.
Since the market expects a potentially big movement after a stock's earnings report, buying an iron condor will be an expensive trade to make, and will lose money if the stock ends up not moving.
I would say buying an iron condor is only a good strategy if the trader is indifferent on price direction, but is expecting either a big movement in either direction in the near future, an increase in implied volatility (essentially an increase in what the market expects from the stock's future price movements), or a combination of the two.
Again, I don't think I've ever bought an iron condor and probably won't use the strategy in the future because it is a strategy that requires precise predictions to work out in your favor. From my own experience, having to predict short-term stock price movements to make money doesn't usually work out too well.
I hope this helps! Let me know if you have any follow-up questions.
-Chris
A short iron condor would do much better for the earnings announcent due to the implied volatility crush. But a long iron condor might fair better the day after earnings when the options prices are much cheaper
Hey Chris, why would anyone want to place this position? I mean, we have already capped the profit potential but we have got the entire debit paid as loss potential? Correct me if I am wrong but, isn't the long straddle or the long strangle a better strategy, if at all we want to long positions since the profit isn't capped there? Also, since we are buying options in strangles and straddles we don't need exposure margins but here since we are selling options as well, we do need a higher margin then why would anyone place this position?
The spreads lower your initial premium a lot, and (without actually doing the math), I think strangles and straddles have to move farther into the money in order to be profitable.
Hi Christ, how to chose long call, put, short cal and put.?
Hi Elly,
It's completely situational and everyone has a different method.
I personally never buy Iron Condors so I don't have a system in place for selecting strike prices. However, many traders choose strike prices based on the delta values of each option at the time of trade entry.
What matters is that you believe the stock price will move beyond one of your short strikes (or at least the breakeven point) of the position before the Iron Condor expires.
Sorry I couldn't be more help here!
-Chris
When should one sell a Long Iron Condor?
If a big move happens and the IC gets close to the max profit it makes sense to close it out since the trade can only make so much more money but has everything to lose
I need help
Edwars,
What do you need help with? I'd be happy to help if you have some questions!
-Chris
I set up an iron condor but i have no idea what im doing, a few mins ago i sold it out of panic for a loss of 320 ,
It was Amzn i have screen shots of it im not to sure what exactly i did wrong but i think i set my sell put higher than my buy put, one option was worth 7k and the other 2k and the other 2 were in the negatives, but i was still in the negatives, I dont understand the credit/ debit aspect nor how to set the limit price
It sounds like you sold an iron condor:
1) Buy a put option (Lower strike than sold put)
2) Sell a put (Below the stock price)
3) Sell a call option (above the stock price)
4) Buy a call (higher strike than call)
The position makes money if the stock price doesn't move quickly towards either of the short strike prices. Check out this video for a visual explanation:
ua-cam.com/video/YlAK2geFJ54/v-deo.html
I hope this helps.
-Chris
Nice