Reverse Iron Condors

jkgraham · Mar 10, 2012

Quote from spindr0:

How about you try learning to say Long Butterfly and Short Butterfly?

Because I don't know, I went to theoptionsguide.com and it describes what I was thinking about doing as a Reverse Iron Butterfly. But really, I don't. I'm learning.

Like I just learned to go to ThinkorSwim and backtest each trade and see that Straddles and Strangles do much better than whatever this strategy is called so I'll just stick with them. No sense on coloring upside the lines.

But thanks everyone for all the help.

MBfromLA · Mar 10, 2012

Seems like most people here have no clue what they are talking about.
I just started a new topic on the subject, and someone directed me to this one....
Here's my original post:
http://www.elitetrader.com/vb/showthread.php?postid=3472121#post3472121

Symbol NFLX : Price 109.00 March 9th

Buy NFLX July 120 CALL 9.80
Sell NFLX July 130 CALL 6.75
Debit $-3.05
--------
Buy NFLX July 97.5 PUT 9.30
Sell NFLX July 87.5 PUT 5.80
Debit $-3.50
----------------------------------------------------
Total Debit -6.55 Maximum Loss
3.45 Maximum Profit..
The chances are very high that in the next 4 months NFLX will move up or down 20 points.

This is just an example:
Why would you do a short term trade, when you can do a 4 or 6 month trade and buy all that time for little or no extra cost, , ,,

I'm starting trading again, plan is to implement this strategy with a few others I favor, I'm simply surprised that not much literature is written regarding this one, and wanted to get as much outside information as possible, other then that, my personal analysis shows very impressive results.

If the probability of each trade placed is approximately 90%, and you make in average of 40% on each trade, and each trade take maximum of 4 months, then you should be able to average 100-120% a year, with a decent account size, 100-200k, that's a not bad living.
If you are a good at reading charts, and know what you are doing, plus implement risk control tactics, and now simply sit and wait when your options will expire,, this is very reasonable....and again,,,,I just wanted to know if someone knows what i don't, and if there is any literature on the subject.... Best of Luck...

atticus · Mar 10, 2012

Quote from MBfromLA:

Seems like most people here have no clue what they are talking about.
I just started a new topic on the subject, and someone directed me to this one....
Here's my original post:
http://www.elitetrader.com/vb/showthread.php?postid=3472121#post3472121

Symbol NFLX : Price 109.00 March 9th

Buy NFLX July 120 CALL 9.80
Sell NFLX July 130 CALL 6.75
Debit $-3.05
--------
Buy NFLX July 97.5 PUT 9.30
Sell NFLX July 87.5 PUT 5.80
Debit $-3.50
----------------------------------------------------
Total Debit -6.55 Maximum Loss
3.45 Maximum Profit..
The chances are very high that in the next 4 months NFLX will move up or down 20 points.

This is just an example:
Why would you do a short term trade, when you can do a 4 or 6 month trade and buy all that time for little or no extra cost, , ,,

I'm starting trading again, plan is to implement this strategy with a few others I favor, I'm simply surprised that not much literature is written regarding this one, and wanted to get as much outside information as possible, other then that, my personal analysis shows very impressive results.

If the probability of each trade placed is approximately 90%, and you make in average of 40% on each trade, and each trade take maximum of 4 months, then you should be able to average 100-120% a year, with a decent account size, 100-200k, that's a not bad living.
If you are a good at reading charts, and know what you are doing, plus implement risk control tactics, and now simply sit and wait when your options will expire,, this is very reasonable....and again,,,,I just wanted to know if someone knows what i don't, and if there is any literature on the subject.... Best of Luck...

It's a short "natural" condor.... so it's akin to asking if there is literature on shorting shares. Your 90% figure is silly.

MBfromLA · Mar 10, 2012

Atticus::::
I hope your account P/L backs up your arrogance.

If you show me your calculations with % of probability of NFLX being up or down 20 points from the current price within the next 4 months, I'll show you 90% probability calculations,,,,
------------------------------------------------------------------------------

sle · Mar 10, 2012

Quote from MBfromLA:

Symbol NFLX : Price 109.00 March 9th
Buy NFLX July 120 CALL 9.80
Sell NFLX July 130 CALL 6.75
Buy NFLX July 97.5 PUT 9.30
Sell NFLX July 87.5 PUT 5.80
----------------------------------------------------
Total Debit -6.55 Maximum Loss
3.45 Maximum Profit..

So, long strangle plus a short strangle at farther strikes is a condor... I honestly don't see a point of this trade, especially at 90% confidence....

ps. atticus beat me to it

newwurldmn · Mar 11, 2012

Quote from atticus:

It's a short "natural" condor.... so it's akin to asking if there is literature on shorting shares. Your 90% figure is silly.

He's not shorting it though... he's buying the condor as he's paying cash for it (vs receiving cash).

At least that's the convention I have always gone by.

atticus · Mar 11, 2012

Quote from newwurldmn:

He's not shorting it though... he's buying the condor as he's paying cash for it (vs receiving cash).

At least that's the convention I have always gone by.

That's short the natural, but the point was that it's a condor. Literature on a "short" condor?

opt789 · Mar 11, 2012

Iron condors have been discussed to death hear and many other places. You can go long (but it for a debit) or go short (sell it for a credit). You can choose strikes far away and sell it so new traders think they have found a magic âincomeâ stream, you can choose near strikes for traders who want long vol/gamma, or you can choose to have the strikes in the middle be the same or close to the same which basically makes it a fly. Any option trade you do is taken down by someone else, be it firm, market maker, or other public but every trade that is done one person is long it and one person is then short it. There is nothing new here and using the word âreverseâ doesnât add anything but confusion.

jkgraham · Mar 11, 2012

Somepepole are getting very specific about the names, there are articles on seekingalpha.com and theoptionsguide.com that call these trades Reverse Iron Condors and Reverse Iron Butterflies. If you don't like the names then take it up with them. All I care about is making money with them on a regular basis.

opt789 · Mar 11, 2012

Quote from jkgraham:

Somepepole are getting very specific about the names, there are articles on seekingalpha.com and theoptionsguide.com that call these trades Reverse Iron Condors and Reverse Iron Butterflies. If you don't like the names then take it up with them. All I care about is making money with them on a regular basis.

Then learn how to trade, a pursuit at which most fail, then spend a couple years learning everything you can about options. You are doing yourself a huge disservice by focusing on one or two specific strategies, then trying to learn how to trade them. As I stated ICs can be formed in almost unlimited ways and they will each have their own characteristics and profiles. Understand options, vol (implied, historical, daily changes, shape of the curve/smile/smirk/surface), and what market makers do and why they do it, and then worry about specific strategies.