I have traded iron condors and other multilegged creatures for quite a while now, so I'll comment on a few items:
1) There is considerable debate about whether it should be called "buying" or "selling". The reason, of course, is that you buy a call and sell another call at a lower strike closer to the money, and you also sell a put and buy one at a lower strike further away from the ATM strike. You buy two options and you sell two options, so are you buying or selling? I prefer to use the term "open" an Iron Condor instead and everyone will also assume these are opened for a net credit and closed for a debit which everyone trading them hopes will be less than the credit, but may not always.
2) Iron Condors will trigger four sided commissions.
3) The comment about subtracting the deltas from 1.00 to determine the approximate probability of expiring in the money is more or less accurate and accurate enough for most trading purposes.
4) Unfortunately, the probability of success may be fairly high, but the magnitude of the losses when they occur will be much greater unless mitigated by astute trading, protective positions designed to reduce these losses or both. I recommend that potential traders try out a few paper strategies for a year or two before plunging into this.
Both 2008 and 2010 had interesting events which made life pretty interesting (and in a not so good way) for pure and simplistic iron condor traders.
1) There is considerable debate about whether it should be called "buying" or "selling". The reason, of course, is that you buy a call and sell another call at a lower strike closer to the money, and you also sell a put and buy one at a lower strike further away from the ATM strike. You buy two options and you sell two options, so are you buying or selling? I prefer to use the term "open" an Iron Condor instead and everyone will also assume these are opened for a net credit and closed for a debit which everyone trading them hopes will be less than the credit, but may not always.
2) Iron Condors will trigger four sided commissions.
3) The comment about subtracting the deltas from 1.00 to determine the approximate probability of expiring in the money is more or less accurate and accurate enough for most trading purposes.
4) Unfortunately, the probability of success may be fairly high, but the magnitude of the losses when they occur will be much greater unless mitigated by astute trading, protective positions designed to reduce these losses or both. I recommend that potential traders try out a few paper strategies for a year or two before plunging into this.
Both 2008 and 2010 had interesting events which made life pretty interesting (and in a not so good way) for pure and simplistic iron condor traders.
