Iron Condors and Stupidity

[dagnyt]

Quote from RichardRimes:

edit...the entire thread of coach's "spx credit spread trading" was that credit spreads where spreads were "sold" and "credit" was received, not bought and paid for...

There has never been any disagreement as to what constitutes buying a debit spread.

The problem occurs when two spreads are traded as part of one position - the iron condor.

I go back to basics: The condor spread is a debit spread. You buy one call spread (or put) and sell another call spread, with higher strikes and a lower price. Thus, you pay. This position wins when the stock remains between the strikes.

The term 'iron' designates an equivalent position. the iron condor behaves exactly like the condor. But the specific options chose are different - but equivalent. this spread also wins when the stock remains between the strikes.

Thus, long a condor is the same as long an iron condor. That's my definition. I've said that before and the disagreement was reasonable and logical. I understand why others disagree with my definition. Sadly there is no formal authority to decide this issue.

IB and TOS disagree and that's part of the problem for everyone.

Mark

 

[RichardRimes]

well put Mark, I understand your position. Thanks

 

[syswizard]

A condor is similar to a butterfly, except there are 2 strikes involved instead of one. But the most important concept is you can be LONG or SHORT the condor or butterfly.
If you are short, you hope prices remain stationary. If long, you hope they move...in either direction.

 

[dagnyt]

Quote from syswizard:

A condor is similar to a butterfly, except there are 2 strikes involved instead of one. But the most important concept is you can be LONG or SHORT the condor or butterfly.
If you are short, you hope prices remain stationary. If long, you hope they move...in either direction.

I don't know what species of butterfly you are describing. Yes, you can be long or short.

In my universe, the LONG buttery (long the wings, short the middle) wins when the underlying ends near the middle strike. For most people, that means the underlying remains relatively stationary.

Mark

 

[SmithTheTrader]

Quote from jwcapital:

4. I read an article about Mean Reversion a few months ago (forget which publication). Someone went back 20 years and compared underlying movement against the highs and lows of the week of expiration and the first post-week. He found that the underlying tends to stay within the boundaries most of the time. He even suggested placing contrarian bets (either bull put spreads or bear call spreads when the underlying closes outside the range).

I hope revert to mean concept is right in this insane market, good luck

 

[MTE]

Quote from SmithTheTrader:

I hope revert to mean concept is right in this insane market, good luck

This "mean reversion" thingy better start working ASAP, otherwise it's gonna get ugly.

 

[SmithTheTrader]

Quote from MTE:

This "mean reversion" thingy better start working ASAP, otherwise it's gonna get ugly.

you still holding your short call in your IC ?

 

[MTE]

Quote from SmithTheTrader:

you still holding your short call in your IC ?

Sure.

 

[SmithTheTrader]

Quote from MTE:

Sure.

This will be one of the month that IC trader will not forget for a long long time (together with Sept/Oct 2008).

we should send a thank you card to well Fargo for their joint effort to virtually pump the market up.

 

[MTE]

Quote from SmithTheTrader:

This will be one of the month that IC trader will not forget for a long long time (together with Sept/Oct 2008).

we should send a thank you card to well Fargo for their joint effort to virtually pump the market up.

It ain't over yet, there's plenty of time for a "negative wells fargo" to happen.