TradingTrainer.com's BlackBox Options Trading System
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:
Trading Trainer
: 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.
Rockwell Trading: Learn how to apply swing trading strategies and techniques to options trading. This trading course is taught by Markus Heitkoetter, a 25-year veteran in trading markets. The course provides insights and trading strategies that can be applied to any market.