Iron Condors

Quote from MTE:

Yes, I do trade them. I lost money on them last year, about 5-10%.
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I guess your expected profits would be much higher than 5-10% during profitable years. I am just wondering how much do you expect to make percentage-wise on average in a profitable year and what would be your expected loss percentage-wise during a losing year based on your strategy.
 
Kinda the whole point of asking for advice. But it's always a bit of a case of the chicken or the egg isn't it. Come back when u got a bit more experience.... All points taken though. How do you know when you know though?


Quote from dagnyt:

1) You have started with an <b>incorrect assumption</b>. Legging into iron condors - or any option trade - is NOT the way to do it 'correctly.'

It is merely one way to build a position.

It's a method that has the potential to increase your profits and your losses. The markets are sufficiently volatile - there is no need to increase the volatility of your P/L results. At least that's my 2 cents worth.

2) Timing the market is very difficult. I'd go so far as to say it's almost impossible. Thus, <i>unless you already have a proven track record</i> of successfully and profitably timing the market, this is NOT the right path to follow.

2) You don't have experience with iron condors. Get some good trading experience undr your belt first. That means really <i>understanding</i> how iron condors work. How to open a position; how to manage risk; how and when to consider closing a position - either to lock in profits or to manage risk. Once you have a good feel on how to do all that successfully - then and only then should you even think about legging into these trades.

3) If you disregard this advice, then pay attention to what SPIN told you.

Mark
http://blog.mdwoptions.com/options_for_rookies/
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Quote from maninjapan:

Kinda the whole point of asking for advice. But it's always a bit of a case of the chicken or the egg isn't it. Come back when u got a bit more experience.... All points taken though. How do you know when you know though?
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Backtesting.
 
'Fill the long side first' are you talking about the long side of just one half of the condor (Put spread or call spread)? and then work the other half? or start with the 2 outside buys and then the 2 inside sells?
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It means buying the long leg of a spread first or buying the long leg of a butterfly before selling the strangle or buying a straddle before selling the outside strangle, etc.
 
Kinda the whole point of asking for advice. But it's always a bit of a case of the chicken or the egg isn't it. Come back when u got a bit more experience.... All points taken though. How do you know when you know though?
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If you're referring to legging in, you know you know when you're getting better fills more often than not. If legging in smokes you, you need to avoid it. Experience, confidence and discipline and a reactive approach to money management take time to achieve. There's no hurry. When you get to that jumping off point, start small.

I'm a small fish in the pond but I have no trouble taking positions 10-15 times the size that I would have 5 years ago. I know what my limits and abilities are and I strive not to exceed them. You have to discover that for yourself as well as what your comfort zone is and what your capabilities and tolerances are. What anyone else does is irrelevant.

Fear is a good thing to respect when your money is at risk.
 
I don't like to time market as I know I always get punished if I try to outsmart Mr. Market by guessing the market direction.

If you think you can time the market and leg-in properly, then you not even need to trade iron condor, a simple long call/put or even stock will do. :p
 
Quote from gkishot:

I guess your expected profits would be much higher than 5-10% during profitable years. I am just wondering how much do you expect to make percentage-wise on average in a profitable year and what would be your expected loss percentage-wise during a losing year based on your strategy.
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My goal is to make about 15-20% per year with ICs. A bad year would be around -15%.
 
Quote from MTE:

My goal is to make about 15-20% per year with ICs. A bad year would be around -15%.
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That makes sense because my backtested results are about 100% profit in a good year and 100% loss in a bad year. I guess it all depends on the width of the spread. My spreads are very wide. And I don't do legging in. Last year was about 100% loss. Thank you for your reply.
 
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