Hello.Sorry for my following stupid question.Iron condor.In my interactive broker account an iron condor (4 options)has a minus sum. Do i buy or sell this minus thing?
Iron Condor - Maximum loss
- Thread starter moolah
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It depends on whether you want to be long or short the Iron Condor. When a trader talks about an IC for the most part they mean they short it meaning that they receive a credit and hope that the underlying expires between the short strikes for max profit.
If this is what you want you should initiate your trade for a credit (I don't know your broker so I don't know which buttons to push) but make sure the trade is done for a CREDIT and that will be the max profit on this trade.
Hi, can someone help me with same question. I have a Amzn iron condor, received $3 credit. 1685/1695P - 1860/1870 C. Whats my max loss because price is currently outside spread? Can I let it expire for loss of $3? Thanks!
The answer to that depends on whether you are buying or selling the Iron Condor.
If you hover the cursor over the bid price of the combo, an information box will temporarily open and give you the details of the trade that will occur if you sell the combo (and conversely if you buy it). Or you can double click the bid (or asked) and the window will open and stay open.
My brain has issues with trading combos with negative values. If I think about it for a moment, I can reason it out and determine what to do. But if I'm seeking price improvement, it really makes my head hurt. More importantly, it increases my chance of order placement error.
To avoid this, reverse the Buy and Sell when creating the combo order. It will eliminate the minus signs (if both are minus) and all will be normal. If it's something like a diagonal spread where either the bid or the ask is minus and the other is positive well then you're going to have to pay close attention to avoid bad order placement.
It was sold because I received credit. It currently inside my short legs. So, I will let it expire today. thanks
For IB it can be a bit counter-intuitive depending on how you look at it. Doesn't matter if credit or not. For example if the (debit) spread costs 1.0, you can buy it for 1.0. If it is a credit spread and gives 1.0 credit, you can still "buy" it for -1.0. It is held in your port as a "long."
I think this is what spin was getting at. It does screw with you a little dealing with the buy/sell minus/plus jazz.
I think this is what spin was getting at. It does screw with you a little dealing with the buy/sell minus/plus jazz.
If you sold it for 3, your max loss is 7. That's because if it goes way up or down, your short put/call spread would be worth 10. You took in a 3 dollar credit, so 10 -3 is 7.
Note that even if your short options are out of the money at expiration today, they still can be exercised by the holder. This might occur if Amazon moves after hours. For this reason, I would suggest you close the position out if it is at all close to your strikes.
On Expiration day watch out if your post-expiry margin gets too high from the ITM ops. IB will automatically close them out at 2:30 (Central). It will show up as red in the account window.
Your questions here clearly indicate that you are playing in an arena that you do not completely understand. In a stock like AMZN you can take a hidden but tremendous risk in letting it expire that you do not even realize. If it did go slightly below the 1695 at the close (early low was at 1695 today) then you have to buy the stock at 1695 and you have LOST all your protection that you thought you had at 1685. If AMZN dropped $100 on the open on Monday then you just lost $10,000 per option. A truly Mayhem moment for you. FSU gave you great advice and if you are doing closer strikes close out the entire IC --- both put and call sides.