adding additional $$ advice

[devilfishlane]

I have been trading Iron Condors for about 1 yr now. I'd like to add additional contracts each month to my postions. Would it be better to


1-
jump from say 10 contracts in SPX to 20 contracts (30 days from exp.)

2- put on an additional 10 contract Condor (50-60 days from exp) in SPX

3- or learn another "vehicle" like Calenders or Butterflies and put additional money in these?

I'm thinking #1 because I wouldn't be constantly in the market, in cause of a massive drop. I'd be in roughly 15 -22 days a month

Thank you

 

[spindr0]

Quote from devilfishlane:

I have been trading Iron Condors for about 1 yr now. I'd like to add additional contracts each month to my postions. Would it be better to

1- jump from say 10 contracts in SPX to 20 contracts (30 days from exp.)

2- put on an additional 10 contract Condor (50-60 days from exp) in SPX

3- or learn another "vehicle" like Calenders or Butterflies and put additional money in these?

I'm thinking #1 because I wouldn't be constantly in the market, in cause of a massive drop. I'd be in roughly 15 -22 days a month

If you're adding contracts to your position, you have greater exposure.

#3 is a separate animal because it's a different stategy. Like everything, if you get the timing and direction right, it works. If not, you know the answer.

There's no easy answer to #1 versus #2 because there are a number of variables involved (distance to short strike, how much the underlying moves, time elapsed before the big move (decay), IV change. How much of each occurs will determine which IC performs better.

2nd month IC brings in a larger credit but decay is slower than near month. So in general, modest move favors near month. Large move favors 2nd month (less loss) and time decay reduces severity of both.

 

[donahuedc]

Well, being out of the market half the time isn't a good way to limit risk unless you can be sure that the times you are out are the times of the massive drops.
Consider learning calenders too. All options spreads are just verticals or calenders or combinations of the two. Your iron condors are just a combination of an out of the money vertical put spread with an out of the money vertical call spread, for instance.
Also consider learning about the greeks. To a beginner the greeks seem complicated, but in fact they are there to simplify options. If you learn them, you can, for instance, add to your IC's when you believe implied volatility is likely to drop and add calenders when you believe IV is likely to rise. And they can be used to take off positions as well. Then you will be in a position to see where the market is and respond, instead of just doing the same thing every month and hoping that you don't lose too much. This is what people mean when they say every type of spread has it's time and place.