Condor Credit Spreads: Most common misconceptions, mistakes, lessons

T

tradingjournals

Among the misconceptions, I come across this one often: "condors are less risky because the probability of success on trade is high". High probability does not equate with low risk (even in indices such as in '87, '98, '08 are example).

What do you think are the most common misconceptions, mistakes, lessons/etc that would benefit condor traders particularly the beginners and also the traders who did not yet get hit by bad trades?
 
I'm still new to IC's, but I try to keep in mind that the call side can get blasted just like the put side. As a matter of fact, this month, if things continue to rocket to the up side, will prove that to me.
Haven't lost, overall, yet, because of what I have to admit were some agile moves using the Sept quarterlies that are available on the ETFs that track the indices, but if not for that I'd be bleeding right now because of the call side of the IC.
This week is going to be interesting to me from this perspective. We shall see.
 
One big misconceptions (Example above) is that Condors are always Iron Condors for credit.

There are:

Long Condor Call Spread
Short Condor Call Spread
Long Condor Put Spread
Short Condor Put Spread
Long and Short Iron Condors

Some are neutral to bullish or bearish, some depend on volatility.
 
take your position, get the sum of all the greeks, then look at the p&l graph at various price pts with a time and iv slide and you have the complete picture and done. Doesnt matter if it's a condor, crane, dragon, or tiger. Trying to find rules to plug dozens of combos with fancy names to certain market conditions is hopeless, at least for myself.
 
Quote from newguy05:

take your position, get the sum of all the greeks, then look at the p&l graph at various price pts with a time and iv slide and you have the complete picture and done.
More...

The greeks are calculated based on a theoretical model.........The greeks are calculated based on a theoretical model......... all together now. The greeks are BASED ON A THEORETICAL model.
 
Quote from tradingjournals:



What do you think are the most common misconceptions, mistakes, lessons/etc that would benefit condor traders particularly the beginners and also the traders who did not yet get hit by bad trades?
More...

condors and flys dont really start paying off until closer to expiration
 
Quote from tradingjournals:

Among the misconceptions, I come across this one often: "condors are less risky because the probability of success on trade is high". High probability does not equate with low risk (even in indices such as in '87, '98, '08 are example).

What do you think are the most common misconceptions, mistakes, lessons/etc that would benefit condor traders particularly the beginners and also the traders who did not yet get hit by bad trades?
More...

Biggest misconception is vega. When the market moves down, the short put really shoots up compared to the ATM/ITM option on a percentage basis. Same with the shorAlso, margin requirements are much higher than for a comparable IB (iron butterfly). All this induces fear, for it is highly probably that the underlying touches one of the short options. Lastly, I feel that IC's need to be managed, and not left alone.
 
Quote from stoic:

The greeks are calculated based on a theoretical model.........The greeks are calculated based on a theoretical model......... all together now. The greeks are BASED ON A THEORETICAL model.
More...

What does this have anything to do with what I posted?
 
The greeks are calculated based on a theoretical model.........
The greeks are calculated based on a theoretical model.........
all together now.
The greeks are BASED ON A THEORETICAL model


Quote from newguy05:

What does this have anything to do with what I posted?
More...
It was an OCD moment

drumming fingers
counting numbers
drumming fingers
counting numbers
drumming fingers
counting numbers
 
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