Iron Condor - Is this the best?

C

crayon851

From what I've been reading, if the markets are random ( which is why some people trade options) and has been backed by some studies. No one can REALLY predict the direction of something accurately over the long term; this pretty much makes having a directional bias pointless.

That being said, isn't it then best to try and collect premium through non directional trades with limited risk? That trade being the Iron condor.

If you sell a 1 STD OTM Iron condor that has a probability of success of approx 64% and collect enough premium where over the odds make the profit greater than the overall losses, isn't success pretty much guaranteed?

For example, in 1000 occurrences if you collected $55 credit in 1.00 wide strikes, if the odds played out as per the expected probabilities, you'd be up overall.
 
Its nothing wrong with what you say if you have never traded option before... I understand what you are trying to say, however, if you understood the option pricing model you would look at it alot differently. Go to amazon and buy this book, also, open up a paper trading account with TOS, Trademonster or something and just play around and see how option prices changes based on implied volatility...
 
crayon851 said:
That being said, isn't it then best to try and collect premium through non directional trades with limited risk? That trade being the Iron condor.
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If you're earning from theta aren't you exposed to vega and gamma? Why would there be an edge just in selling premium?
If the options are priced correctly you'll either not get filled or if you do you'll have negative EV due transaction costs.

You might not be wanting to take a view on delta but you've exposure to other greeks with this "strategy".

I knew a trader once who did well on index short strangling using European style options. However he was taking a view on when implied volatility had been bid out of all reasonable proportion. I think he had some flow information also, and a lot of the edge went away after late 2007.

Don't kid yourself that there is an opportunity in something so basic. Markets aren't that inefficient.


crayon851 said:
No one can REALLY predict the direction of something accurately over the long term; this pretty much makes having a directional bias pointless.
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This leaves two sensible options. Investigate accurate short term prediction (<1s to a few minutes) or find non directional trading strategies.
 
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Ghost_of_Blotto said:
I knew a trader once who did well on index short strangling using European style options. However he was taking a view on when implied volatility had been bid out of all reasonable proportion. I think he had some flow information also, and a lot of the edge went away after late 2007.

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It is actually after ~ 2008 Jun.
Iron condor will make your broker and MM happy.
 
ive been trading options for the past year now and havent blown up yet. I also havent developed a net loss either so i think thats pretty good. not as good as some though.

i trade with interactivebrokers for 0.7 per contract. my account is small - 15k. i dont take more than one or two cash secured put trades and i trade a lot of credit spreads where losses are minimal. to date ive netted a whole $70!

im just trying to take my trading knowledge to the next level hence why Im on here.

i also feel like, people who are constantly educating themselves on market and option theory are looking for the "holy grail" of trading and often talk themselves out of trades. the most successful guy ove seen here is that ben guy who seems to have a very simple trsding plan.
 
Usually on longer time frame eg a few days to months I trade non directional.
Except on index futures.

On intraday I trade directional automated on commodities.
 
AdrianHagh81 said:
Usually on longer time frame eg a few days to months I trade non directional.
Except on index futures.

On intraday I trade directional automated on commodities.
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what do you use for selection of underlying? do you try and forecast max price movement of deeivative based on x% move of underlying?
 
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