Overview of The Iron Condor Option Trading Strategy

An Iron Condor spread is one trading strategy that is used heavily by options traders.  The Iron Condor option spread is based on the same underlying concept as the Long Condor spread. That is, you are not expecting the stock to move very much at all during the timeframe of the trade. But you want to hedge your bets and give yourself a little bit of wiggle room just in case the shares do breakout. While a traditional Long Condor consists of two call option spreads across four different strikes, a Iron Condor is comprised of a put option credit spread at the lower strikes and a call credit spread at the two higher strikes. For example, if stock xyz is at $55, you can buy a put option at $50 and sell $55 put option. Next, you would sell a $60 call option and buy a $65 call option. This pair of trades will result a net credit upon entering a trade, which is why some traders prefer the Iron Condor to a regular condor spread. However, it is worth noting that this upfront credit is your maximum potential profit. Ideally, you would prefer to stay between $55 and $60 until expiration. This means that your options will expire worthless and you won't have to take any closeout action, which minimizes your cash outlay on the spread. The primary advantage to trading an Iron Condor strategy, as opposed to the Iron Butterfly option strategy is that your sweet spot on your trade is wider. In other words, there is room for the stock to fluctuate between the strike price of the sold put and the strike price of the sold call without endangering your trade. However, the tradeoff for this advantage is a lower profit potential and you should still ensure that you don't try out an Iron Condor strategy on an historically volatile stock or during an extreme period of volatility.

To find additional information on options trading and the Iron Condor strategy visit the following websites:

Options University :  This site contains options trading courses, online trading classes, live trading seminars and tutorials on the various trading strategies. The site also provides a very effective options trading mentoring/coaching program.  Free trading seminars are offered on a frequent basis.

Profits Run: Learn how to apply swing trading strategies and techniques to options trading. This trading course is taught by Bill Poulos, a 30-year veteran in trading markets. The course provides insights and trading strategies that can be applied to any market.