Mitigate Risk - iron condor

[EliteTraderNYC]

Hey guys what are some ways to mitigate risk on an iron condor?

One way of course is to buy a way out of the money option on SPY or some other good value option puts to avoid catastrophic overnight losses. What else?

 

[rmorse]

The spread on it's own has limited risk. Hedging it might overwhelm your edge. I think the best way to mitigate risk on an iron condor is to only enter the trade when you have the expectation of not having to cover and reduce your size. Pick your strikes carefully and enter the trade at a fair price.

Just my opinion.

Bob

 

[cdcaveman]

why not butterfly instead of condor? why specifically did you pick condor?

 

[EliteTraderNYC]

Condor is a much higher rate of success than a fly like 80% or 90% success where as a fly can be much lower, like 10%.

 

[cdcaveman]

Condor is a much higher rate of success than a fly like 80% or 90% success where as a fly can be much lower, like 10%.

how do you derive your success rate? I've always thought people wanting to trade condors like to be right alot...haha...

 

[EliteTraderNYC]

You take the actually recent volatility or the implied volatility and use it in a calculation to determine the chances of it reaching a given strike price

 

[EliteTraderNYC]

condors are profit birds that tend to glide into small stead profits.

 

[cdcaveman]

haha.. then boom they blow out

 

[OTM-Options]

Long OTM weekly options is like a rocket in flight.

 

[jonny1lot]

No need to hedge-you are covered whether or not you are short or long the condor.