GOOG Iron Condor

[viruscore1]

Are you sure you want to do that? Once you close one side, your risk is no longer bounded? But what do I know, I only trade directional. Perhaps some other experts can educate me too.

Depends on the situation, I close out each side (leg) at a time. I even enter multi leg trades one leg at a time. But that's a whole different thread.
I just closed out short side of AAPL spread and left the long side alone, it was down to 0.

 

[jys78]

This thread has to be a joke.

 

[ironchef]

Depends on the situation, I close out each side (leg) at a time. I even enter multi leg trades one leg at a time. But that's a whole different thread.

There are books written that said iron condor should be traded as one. I am no expert so won't argue, just want to hear your view of why you think trading it one leg at a time offers advantages?

By the way, thank you for sharing your trade. Always good if I can learn something new.

Regards,

 

[viruscore1]

This thread has to be a joke.

Yeah Canadian option traders are the punchline hahaha

 

[Kim Klaiman]

This trade has a lot of drawdowns. For the benefit of other readers:

1. Once you get such a small credit, you have to hold for a very long time to realize any meaningful gain (or hold till expiration).
2. One big loss erases months of gains.
3. In order to manage risk, you cannot allow the losers be much bigger than the winners. To do that, you need to set a stop loss. Which means that your 92% probability ratio is a mirage. In reality, your winning ratio will be nowhere close to 92%.
4. 20% move that did not happen in the last x years is a mirage as well. In order to hit the stop loss, GOOG needs to move only 5-7% (depending on the timing of the move and the IV).
5. If the sharp move is down, IV will increase and hurt the trade.
6. If the stock gaps, it can easily go though your stop loss.
7. In options that are OTM, slippage will be much more significant.

Now, all that doesn't necessarily mean it's a bad trade. It could work very well if you are okay with making 4-6% in 2 months.

 

[ironchef]

This thread has to be a joke.

? Why so may I ask?

 

[viruscore1]

There are books written that said iron condor should be traded as one. I am no expert so won't argue, just want to hear your view of why you think trading it one leg at a time offers advantages?
By the way, thank you for sharing your trade. Always good if I can learn something new.
Regards,

What i learnt from books, the authors don't make a living trading. They earn their money from book sales. It can be done as a whole or each leg at a time. I do both, depending on the situation.

 

[beerntrading]

There are books written that said iron condor should be traded as one. I am no expert so won't argue, just want to hear your view of why you think trading it one leg at a time offers advantages?

By the way, thank you for sharing your trade. Always good if I can learn something new.

Regards,

Depends how you trade them...most of the time when I end up in an IC, it's because my credit spread had a favorable move, and one that's about to give up the ghost--I'm usually at about a $1 credit on a $1 spread at that point.

1. If the sharp move is down, IV will increase and hurt the trade.
2. If the stock gaps, it can easily go though your stop loss.

Not to mention that moves of that magnitude tend to be gaps down; gaps down tend to increase volatility; and gaps down tend to be followed by further large price moves, often down.

 

[viruscore1]

This trade has a lot of drawdowns. For the benefit of other readers:

1. Once you get such a small credit, you have to hold for a very long time to realize any meaningful gain (or hold till expiration).
2. One big loss erases months of gains.
3. In order to manage risk, you cannot allow the losers be much bigger than the winners. To do that, you need to set a stop loss. Which means that your 92% probability ratio is a mirage. In reality, your winning ratio will be nowhere close to 92%.
4. 20% move that did not happen in the last x years is a mirage as well. In order to hit the stop loss, GOOG needs to move only 5-7% (depending on the timing of the move and the IV).
5. If the sharp move is down, IV will increase and hurt the trade.
6. If the stock gaps, it can easily go though your stop loss.
7. In options that are OTM, slippage will be much more significant.

Now, all that doesn't necessarily mean it's a bad trade. It could work very well if you are okay with making 4-6% in 2 months.

Please by all means, go ahead and take other side. Your bs means nothing to me. Your'e the authority from canada that trades 20k account. Each of my trades is equivalent to your whole account.

 

[Kim Klaiman]

There are books written that said iron condor should be traded as one. I am no expert so won't argue, just want to hear your view of why you think trading it one leg at a time offers advantages?

By the way, thank you for sharing your trade. Always good if I can learn something new.

Regards,

IC should be opened as one trade to avoid directional risk.

Once opened, it is a good practice to place a GTC order to close each side of the condor individually once there is not much value left on that side. This way you can use swings in the stock to close each side individually and get to your desired target earlier.