This is not how I understood the video. Never does he say anything about easy money.
That's the direct implication of these ostensibly easy solutions. I'm saying that no such thing exists in reality.
I think his point was that you might have chosen iron condor because you believed that stock would stay range bound. However, while your initial premise proved to be correct, something has changed your mind and you want to morph your existing position to make it more directional. It’s morphing in anticipation, not after the fact.
So... nothing has changed, but you want to adjust your trade anyway? Or, to put it another way, you believe that you have better/earlier information than the rest of the market (I'm assuming there's at least
some rational perspective behind the change)... does this sound like a reasonable assumption to you? Granting that you believed in your thesis when you entered the trade, there would have to be some overwhelming reason to change your mind and to assume a new thesis... but what you're suggesting here is that your basis for making the change was
so subtle that the rest of the market didn't notice (i.e., the price of the option/underlying didn't change) but yet
so strong as to make you abandon your original concept and change it to something radically different. I'm just not visualizing any scenario where that would make sense.
But let's say you're Cathy Wood and there are voices in your head that tell you what's coming. Great. Since - as you say - your initial premise proved to be correct, then why wouldn't you just take the small profit that being correct brought you, close the IC, and then put on whatever the appropriate new strategy for the new concept was without the unnecessary complexity of "morphing"? I'm just not seeing any daylight between "things have changed, it makes sense to get out" and "things haven't changed, but it's time to get in differently."
For example, let’s say you have iron condor with short legs 50 and 70 with stock at 60. You are watching the stock and collecting premium but you are noticing it is acting in a bullish manner (whatever that means to you). You decide to close the short 70 call but keep the rest in place. So you are left with bull put spread and long OTM call. You went from neutral to very bullish. What’s wrong with that?
How does a stock "act bullish" without increasing the price of that call (i.e., without it costing you more to get out than you got paid to get in?)
But OK, let's set that aside and look at it from the finance math perspective. Let's say you're right: the stock is going to go up. Say your short brought in 0.50 and your long was at the 75 strike (assuming 5-point wings) and cost you 0.25, and the prices haven't changed much (i.e., not much time has passed) - so you buy the short back for ~0.50.
Here's what you ended up with: a call that's
$15 above the current price, at something around 5 delta. I.e., a 2-sigma bet; outside the distribution and ~95% unlikely to end up in the money.
A very poor bet, statistically... and remember that just a bit before, you believed that the price would stay range-bound, and now you believe in something not just a little different but
cataclysmically different: that instead of being range-bound, the stock is going to move much more than 25%! You'd need that much movement just to touch your strike... but then you also need more movement to overcome the debit you paid, and then even more to start making some money (that, after all, being the point here.)
Does any of this sound like reasonable, likely stock movement to you? And if you
could predict that violent of a move, why wouldn't you just get out of the original IC for a couple of bucks profit and then put on a ton of spreads and
really make some serious money instead of pennies?
