There is a difference, but it's not on the basis you discuss. It has to do with the positioning of the trade relative to the underlying. If you're trading market neutral, the iron is the better trade because all the options are either ATM or OTM which reduces transaction cost. If you have a delta bias, then you should prefer the natural over the iron for the same reason.
Condor Credit Spreads: Most common misconceptions, mistakes, lessons
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There is a difference, but it's not on the basis you discuss. It has to do with the positioning of the trade relative to the underlying. If you're trading market neutral, the iron is the better trade because all the options are either ATM or OTM which reduces transaction cost. If you have a delta bias, then you should prefer the natural over the iron for the same reason.
What does delta bias have to do with it? An iron condor, put condor, or call condor are all synthetically equivalent. The main problem with a condor is that it starts with an in the money short call or put which increases your risk of assignment. Another practical issue is that open interest of deep in the money options tends to be far lower than open interest of equally far out of the money options. So you can expect higher liquidity and thus better bid/ask spreads for the OTM options (a general rule, not a guarantee).
If liquidity and assignment risk aren't an issue you should use whichever one has the best price. Having a direction bias might make you decide to sell a condor with a positive or negative delta, but I can't see how that would affect your choice of a condor or iron condor.
I wasn't addressing assignment, since assignment isn't a disadvantage, although that's a longer discussion. My point is that when trading ITM options, there is a near certainty of a less favorable bid-ask spread compared to the complementary call/put position. That makes trading ITM positions almost always more transaction intensive compared to the equivalent OTM trade. A strong delta bias might put all the legs of your natural ATM/OTM which would then make that trade preferable to the equivalent iron.
Okay, by "biased" I hadn't understood *how* biased. Most iron condors involve selling a well OTM bear call spread and selling a well OTM bull put spread. You are considering the case where you expect the underlying to go up, say, (but not up too much) so you buy a near the money bull call debit spread and reduce its cost by selling a well OTM bear call credit spread (i.e., a call condor). I agree, this is a case where the non-iron (wooden?) condor makes good sense.
Quote from donnap:
LOL, good post.
Plus, it's really cool to tell your friends that you're trading IRON CONDORS - as if you're really smart or something.
I have no idea what your talking about? :eek:
I tried the more chemically correct version but all the letters would not fit.