Quote from RedEyeFly:
Does anyone on here have experience managing long term condors, such as 9-12 months out, probably using leaps?
The profit profile near the strike can be similar to that of a call write with put protection, however the condor requires substantially less capital.
Probably not a terribly popular idea right now with the VIX and implied vols so high, but should everything calm down a bit, it could be an interesting play for the income investor. Any thoughts?
I prefer 3-month iron condors and have bought some 6-month iron condors.
There are advantages to longer-term iron condors. No LEAPS are needed when you trade European style index options.
The obvious disadvantage is slow time decay. But that should not be enough to discourage you.
The major factor that should (IMHO) go into deciding whether to trade more distant iron condors is the current level if implied volatility. The higher it is (such as currently), the higher premium you can collect for the spreads you sell. Obviously the very volatile markets justify those high premium levels, but if you choose the strike prices that suit your comfort zone, and nothing horrible happens right away, these positions have the capability of providing excellent profits.
Thus, this is a play on the future direction of implied volatility, whereas shorter-term iron condors are more of a play of market movement. And because you appear to be willing to invest with the expectation that things will settle down, this is a very appropriate strategy for you. Just be aware that your account may show some significant losses if IV increases further. Thus, don't buy too many such iron condors.
Yes, less capital and limited risk are two of the attributes than make buying iron condors an very popular strategy.
You can choose to trade ATM options, but most prefer OTM. That's also a comfort zone decision.
Regarding the opinion of forex: He is neither 'right' nor 'wrong.' Short-term iron condors are the most risky of all. Yes, there's less time, but if the market moves, the higher gamma of near-term options can hurt. I prefer to close my iron condor positions when there are only two or three weeks remaining, so we obviously have different comfort zones. Trade within yours.
Mark
http://blog.mdwoptions.com/options_for_rookies/
