Make sure that you have an adjustment and trading management plan in place and well thought out before you ever start to trade the iron condor option trading income strategy. Before you even think about what strikes you will use you should have this management plan already in place. If you don't you could get utterly destroyed by a big move in the market or the underlying and you wouldn't have a clue what to do. Just a couple of these can annihilate your account.
Another way of looking at the iron condor is to view it as a sold strangle with purchased wings on the outer edges for protection. The strangle is an option strategy where a trader 'strangles' where the underlying is trading at buy buying a call option and a put option on either side of where the underlying is trading at. Since the options that are being sold in a strangle play are much farther away from where the underlying is trading at than say in a straddle play - the amount of initial credit brought into the trade is much less as well. Many traders who use this strategy prefer to think of it as two credit spreads: a put spread below the market paired with a call spread above the market. Your paired positions are the condor's wings.
It is imperative that you be prepared in advance for adjusting iron condors because your potential losses in this strategy are always substantially greater than your potential gains. This has a lot to do with being profitable with this trading strategy by playing the probabilities to your favor. So a large movement one way or the other, or even just one that is larger than you hoped for or anticipated, threatens to cost you big time.
Steps to winning with the Iron Condor Option Strategy.
- Know that there are different ways for adjusting iron condors. There are not any rules either that say you have to do so this way or that way.
- Protecting your profits and your account should always come first.
- The last thing you want to do is let a small loss grow into a big loss.
- Be happy with small steady wins.
Your key to success in trading this strategy is consistency in gaining profits. These profits must be protected. Iron Condor adjustments should be used with your trade management plan when the potential for position losses present themselves.
When I was just starting out trading iron condors, I many times found myself booking impressive returns month after month - then always seemed to wind up somehow giving those gains back to the market during the usual one or two wild months the market threw at me. BUT - all that changed after I discovered this very simple to follow step-by-step method of adjusting iron condor positions. After discovering my method, I now know exactly what to do when a problem month comes along to keep from losing the rest of my iron condor profits I've accumulated throughout the year.
Another way of looking at the iron condor is to view it as a sold strangle with purchased wings on the outer edges for protection. The strangle is an option strategy where a trader 'strangles' where the underlying is trading at buy buying a call option and a put option on either side of where the underlying is trading at. Since the options that are being sold in a strangle play are much farther away from where the underlying is trading at than say in a straddle play - the amount of initial credit brought into the trade is much less as well. Many traders who use this strategy prefer to think of it as two credit spreads: a put spread below the market paired with a call spread above the market. Your paired positions are the condor's wings.
It is imperative that you be prepared in advance for adjusting iron condors because your potential losses in this strategy are always substantially greater than your potential gains. This has a lot to do with being profitable with this trading strategy by playing the probabilities to your favor. So a large movement one way or the other, or even just one that is larger than you hoped for or anticipated, threatens to cost you big time.
Steps to winning with the Iron Condor Option Strategy.
- Know that there are different ways for adjusting iron condors. There are not any rules either that say you have to do so this way or that way.
- Protecting your profits and your account should always come first.
- The last thing you want to do is let a small loss grow into a big loss.
- Be happy with small steady wins.
Your key to success in trading this strategy is consistency in gaining profits. These profits must be protected. Iron Condor adjustments should be used with your trade management plan when the potential for position losses present themselves.
When I was just starting out trading iron condors, I many times found myself booking impressive returns month after month - then always seemed to wind up somehow giving those gains back to the market during the usual one or two wild months the market threw at me. BUT - all that changed after I discovered this very simple to follow step-by-step method of adjusting iron condor positions. After discovering my method, I now know exactly what to do when a problem month comes along to keep from losing the rest of my iron condor profits I've accumulated throughout the year.
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