Bread & Butter Iron Condors

[blueplayer]

Quote from Put_Master:
If it's really late in the contract, a penny below your strikes will wipe you out.
if it's early in the contract, you can be even lower below your strikes, and still save some money, due to the time premium.
But that spike in IV is NOT going to be very friendly to your net worth.

Hello Put_Master, just a quick comment.

In the case of an ITM vertical credit spread the IV spike is actually helping the seller as it will reduce the amount of the loss.

The vega for vertical credit spreads that are ITM is almost always positive, so you get a little help from the IV spike. Although not enough to switch the position from loss to profit

 

[Put_Master]

Quote from blueplayer:

Hello Put_Master, just a quick comment.

In the case of an ITM vertical credit spread the IV spike is actually helping the seller as it will reduce the amount of the loss.
The vega for vertical credit spreads that are ITM is almost always positive, so you get a little help from the IV spike. Although not enough to switch the position from loss to profit

I was thinking more in terms of how a sig spike in IV might change the "structure" of the bid/ask.
That being, instead of it normally being a bid/ask of .50 - .60 for example, that IV spike might turn the "new numbers" into a much wider bid ask gap than $0.10
Thus making it more expensive to close the trade.

And the wider your spread, (for example, a 5 point spread, vs a 1 point spread), the wider that new bid/ask gap might go.
I just don't see how a spike in IV can be of any help to a spread trader closing down the entire trade.
It's one thing if you are just closing down the long put.
But given the massive amount of leverage most spread traders will probably be on, (10 times their account value.... or more),... I don't see how they can consider buying 90% - 95% of their stocks.
Particularly since they will already be under water.... and probably in a current trend of dropping even more.

 

[paladincomp]

Quote from swag:

How did she not trade September if she starts these IC's 80 days out?

I can ask Amy. If I recall, she had a vacation planned around Sep and didn't trade that expiration cycle and got lucky.

I work with Dan Sheridan and Amy is in our community. She's going to be a presenter on Nov 9th with the current Iron Condor class that just started if anyone is interested.

 

[cdcaveman]

Quote from paladincomp:

I can ask Amy. If I recall, she had a vacation planned around Sep and didn't trade that expiration cycle and got lucky.

I work with Dan Sheridan and Amy is in our community. She's going to be a presenter on Nov 9th with the current Iron Condor class that just started if anyone is interested.

Options safari is dan looking jacked up from sports betting.

 

[jimmyjazz]

Sorry for the bump, but I've been studying double diagonals, etc. and came across this thread. A key part of the discussion has centered around the short strikes of iron condors (or credit spreads) going ITM and what might happen, particularly with puts. It has been stated many times that "spread traders don't let spreads go to expiry", which presumably reduces risk exposure.

So if you're gonna close out your spread early, regardless of moneyness, why not just use debit spreads and escape all this assignment crap? You control your own exercise/assignment destiny with debit spreads, right? Isn't one of the biggest reasons for using credit spreads the fact that one need not close them out when OTM at expiry? If you close them out before expiry as a matter of policy, then where's the advantage, other than some marginal (hah) credit up front?