New to Iron condors

Quote from spindr0:

What is a pure IC with some dynamic adjustment?

I have a problem with dogma like "a strategy is a complete loser in the long run." Option strategies involve some degree of timing and direction. You have to adapt to current circumstances. When the market was collapsing in '08 and coming back hard in '09, it was obvious that non-directional strategies were unsuitable and short/long was the place to be. Different things work at different times... and then there's one's ability/or lack thereof to react, adjust, cut losses.
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I agreed, end of the day, to make $$, you need to have a good judgement and ability to predict if the market is going to:
1) UP
2) Down
3) Sideway

You have to be right in the direction. Same thing applied to the volatility.

Options (include IC) just a instruments and it won't give you any edge or ability to predict the direction of the market/volatility.
 
I am not sure this can be practically done with SPY, unless you go out several months. Even with a very low-commission broker, the commission will eat up a large part of the return.
 
Correct me if I'm wrong but the biggest problem with an IC is that it has a negative expectancy, meaning that you will win more often, but smaller amounts. When you lose (less often) the loss are way bigger. So in the big picture you don't make anything except huge commissions for your broker.

Is there a positive expectancy trade in options?
 
Quote from drcha:

I am not sure this can be practically done with SPY, unless you go out several months. Even with a very low-commission broker, the commission will eat up a large part of the return.
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++1
 
Quote from Chitrader18:

Correct me if I'm wrong but the biggest problem with an IC is that it has a negative expectancy, meaning that you will win more often, but smaller amounts. When you lose (less often) the loss are way bigger. So in the big picture you don't make anything except huge commissions for your broker.

Expectancy or expected value is the sum of all outcome probabilities times all outcome returns. It does not mean what you have said above.

E = (probability of outcome 1 * return of outcome 1) + (probability of outcome 2 * return of outcomes 2) + ....

Is there a positive expectancy trade in options?

The expected value of all options trades is approximately zero, ignoring commissions and slippage.
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i like buying the iron condors to sell real options.



if you sell them, don't forget to take off a leg if the market give it to you. nothing like chasing one side for a loss and then the other side as well.
 
The iron condor is very commission intensive, so you need to avoid the spy which is too small for the commision. Dan really likes the RUT-- it's big and very liquid.
 
I currently make my living trading Index Options Credit Spreads and forming Iron Condors when market conditions permit.

The credit spread is the cake. Forming the Iron Condor is the icing because the second spread does not require any additional quarantined funds to enter.

If the market trends, one of the two credit spreads that formed the Iron Condor has likely reached 80%+ of its potential profit. It can be rolled and a new spread established by recycling the quarantined funds. One series I closed last month had 5 spreads over a 60 day period. 2 CALL spreads and 3 PUT spreads. All were profitable and the overall profit as an Iron Condor was over 50%.

Credit spreads and therefore Iron Condors are a commission intensive trade. If you pay by the option, as I do using ToS, then it is to your advantage to have wide differences between strike prices. I prefer NDX ($25 between strikes) but also trade RUT ($10) and SPX ($5). I don't trade SPY ($1) because the commissions would take up too large a percentage of the profits. For $1 between strikes, you can jump several strikes if you like the index for other reasons. Just make sure both spreads have the same difference in strikes if you want to take advantage of putting on the second spread without an increase in quarantined funds.

For the three indexes I trade, my commissions come out to about 6.5% of profits.
 
Quote from cdowis:

The iron condor is very commission intensive, so you need to avoid the spy which is too small for the commision. Dan really likes the RUT-- it's big and very liquid.
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My concern about the RUT is that many of its components are so lightly traded some may not even open the day after trading ceases so settlement is not till Saturday. That exposes the trader to one additional day of market gap risk that must be taken into account when making the expire vs. close decision.

Whether because of the settlement issues or other reasons, RUT does not have weeklies. I have become a fan of weeklies but still trade them in pre-production mode (small money). Even small money trading when recycled weekly can have an impact on your account when compared to the 60 day cycle I have when trading monthlies. I estimate weeklies added two percentage points to my performance for December.
 
Thanks for the post.

I have started to take a look at the weeklies, but my focus on the RUT has kept me from doing anything. For the new trading year, I can see that I need to start using them.

Can you give us some idea on what you are doing with them.
 
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