Iron Condors ? how many should we have

[MTE]

Quote from rew:

I agree. After all, you're short the bear call spread, and you're short the bull put spread, so it seems peculiar to say that the combination of the two is long.

Maybe it's similar to double negative being positive. If you short both you actually end up long.

 

[Eliot Hosewater]

From the Wiki page:

To buy or "go Long" an iron condor, the trader will buy (long) options contracts for the outer strikes using an out-of-the-money put and out-of-the-money call. The trader will also sell or write (short) the options contracts for the inner strikes, again using an out-of-the-money put and out-of-the-money call. The difference between the put contract strikes will generally be the same as the distance between the call contract strikes.

Because the premium earned on the sales of the written contracts is very likely greater than the premium paid on the purchased contracts, a long iron condor is typically a net credit transaction. This net credit represents the maximum profit potential for an iron condor.

So I went to Natenberg and he defines it as short. Guy Cohen defines it as long.

I recall seeing a post by atticus (or maybe riskarb, I've been looking at his old journals) where he talks about being "long the fly" and I think I figured out he was talking the credit version.

ETA: Just to add to the confusion, if you go to Thinkorswim and select "buy an IC" you get the debit version, and vice-versa.

 

[deltahedge]

I tend to agree with MTE and others that I would call it being short the condor as opposed to "long the condor." That being said if one were to apply this methodology to butterflies it would be deemed as "short the butterfly" which I haven't heard/read too often. In fact, I would associate that with being the inverse of the traditional fly position people typically put on such that you would be long the body short the wings. Regardless of naming conventions, I think most traders who are familiar with the popular strategies are well aware of the position a fellow trader takes when he/she discusses about it.

 

[HowardCohodas]

Long iron condor

To buy or "go Long" an iron condor, the trader will buy (long) options contracts for the outer strikes using an out-of-the-money put and out-of-the-money call. The trader will also sell or write (short) the options contracts for the inner strikes, again using an out-of-the-money put and out-of-the-money call. The difference between the put contract strikes will generally be the same as the distance between the call contract strikes.

Because the premium earned on the sales of the written contracts is very likely greater than the premium paid on the purchased contracts, a long iron condor is typically a net credit transaction. This net credit represents the maximum profit potential for an iron condor.

 

[Premium]

I use the terms condor and iron condor interchangeably. There's no question about what buying or being long a condor position means - long the wings, short the body. So I just use the same for iron condor - long means owning the wings. "I have an iron condor position on" means I'm long the position. Quibbling

 

[donnap]

Quote from HowardCohodas:

Long iron condor

Have you ever clicked on the discussion tab? The debate goes on and on.

 

[HowardCohodas]

Quote from donnap:

Have you ever clicked on the discussion tab? The debate goes on and on.

There is no debate in my mind. If I want to communicate with others in the industry then I conform with the industry's definition. These debates are entertaining, but of no practical value.

 

[rew]

Quote from HowardCohodas:

There is no debate in my mind. If I want to communicate with others in the industry then I conform with the industry's definition. These debates are entertaining, but of no practical value.

I'm not convinced that "the industry" ever got its mind straight on this one.

 

[stoic]

Quote from Premium:

I use the terms condor and iron condor interchangeably. There's no question about what buying or being long a condor position means - long the wings, short the body. So I just use the same for iron condor - long means owning the wings. "I have an iron condor position on" means I'm long the position. Quibbling

What about the:

Long Call Condor
Short Call Condor
Long Put Condor
Short Put Condor

And what is called the Long Iron Condor , Long the Body, short the Wings.

CBOE option margin manual.

 

[Eliot Hosewater]

Quote from rew:

I'm not convinced that "the industry" ever got its mind straight on this one.

That's the point I was trying to get across in my post the included the same Wiki page that Howard repeated. Even well known authors don't agree.

The CBOE, which might be considered "the industry" seems to confirm that it's long because it's a synthetic form of the long all-put or all-call version.

http://www.cboe.com/LearnCenter/course20.aspx

# Iron Butterfly
A long synthetic, or “iron,” butterfly spread is made up of both call options and put options on the same underlying stock (or index). It’s constructed by purchasing one put with a given strike price, selling one call and one put with a higher strike price, and purchasing one call with an even higher strike price.

# Iron Condor
A long synthetic, or “iron,” condor spread is made up of both call options and put options on the same underlying stock (or index). It’s constructed by purchasing one put with the lowest strike price, selling one put with a higher strike price, selling one call with an even higher strike price, and purchasing one call with the highest strike price.