Has anyone ever bought Reverse Iron Condors before earnings? They look like an interesting alternative to Straddles and Strangles because they "could" costs less and have a smaller window of failure, but with less profit as the trade-off. If you use them, do you have any rules or suggestions on how to implement them? Would you do them on the weeklies? It looks interesting but doesn't get much attention. I wonder why?
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Reverse Iron Condors
- Thread starter jkgraham
- Start date
Try a reverse anaconda those seem to work for me.
First you say this the following in this thread:
http://www.elitetrader.com/vb/showthread.php?s=&postid=2133958#post2133958
Then you say the following here:
http://www.elitetrader.com/vb/showthread.php?s=&postid=2726864#post2726864
So first you say you're employed at a prop firm, then you ask a simple question that would probably be bread and butter at a prop firm, and then finally, you top it off with this:
http://www.elitetrader.com/vb/showthread.php?s=&postid=3462050#post3462050
Dude, you either have multiple people signing on with your userID or you clearly have NO clue about trading. I'm new myself but if YOU were working at a prop firm, I am probably good enough to be the head trader at that shack you speak of.
My point? It would be nice if you weren't so dismissive of questions asked here (given your own background). The guy has a legitimate concern. Do you know the answer?
http://www.elitetrader.com/vb/showthread.php?s=&postid=2133958#post2133958
Quote from EliteTraderNYC:
Hello all,
I've been trading for a few months fulltime now and am profitable. I work for a fairly legitimate prop firm without a formal training program and am looking for a mentor.
[...]
I am a well educated guy, I graduated with an MBA from a pretty well known school, I am also fairly quantitative and I take my career seriously. I'm looking for a mentor is who fairly similar and who's been in the game for quite some time.
[...]
EliteTraderNYC
Then you say the following here:
http://www.elitetrader.com/vb/showthread.php?s=&postid=2726864#post2726864
Quote from EliteTraderNYC:
Are ECN fees generally also paid by the trader or by the prop firm? Are they typically included in the per share price to the trader?
So first you say you're employed at a prop firm, then you ask a simple question that would probably be bread and butter at a prop firm, and then finally, you top it off with this:
http://www.elitetrader.com/vb/showthread.php?s=&postid=3462050#post3462050
Quote from EliteTraderNYC:
Hey guys, do you get fills on wide bid/ask options spreads or no where do you get the fills? I.E', must you take the bid ask or do you get something better. Just wondering.
Dude, you either have multiple people signing on with your userID or you clearly have NO clue about trading. I'm new myself but if YOU were working at a prop firm, I am probably good enough to be the head trader at that shack you speak of.
My point? It would be nice if you weren't so dismissive of questions asked here (given your own background). The guy has a legitimate concern. Do you know the answer?
Yes but options trading is a lot different than equity trading, because its a lot less liquid (and I just started this recently). My other posts you are refering to are from 2008 so its been a few years.
Quote from jkgraham:
Has anyone ever bought Reverse Iron Condors before earnings? They look like an interesting alternative to Straddles and Strangles because they "could" costs less and have a smaller window of failure, but with less profit as the trade-off. If you use them, do you have any rules or suggestions on how to implement them? Would you do them on the weeklies? It looks interesting but doesn't get much attention. I wonder why?
What's a reverse Iron Condor? Being long an iron condor? That is buying the body and selling the wings?
If so, it depends on the stock and your expectations of volatility. But if you are going to buy volatility for a big move, why would you cap your upside by selling anything. Especially when they are deep otm wings where premium received is small and convexity risks are very high.
What's a reverse condor? Well it doesn't appear to be very common but that's one thing Iâm curious about. Basically turn the Iron Condor upside down and move the wings in as far a possible toward the center.
In other words buy two ATM options (+1 PUT and +1 CALL) and sell (-1 CALL) one strike up and sell (-1 PUT) one strike down. The result was about a 10% gain with a breakeven range one strike above and below the center. It's cheaper than both the Straddle and Strangle, has less chance of losing but a lower return.
If I expect a large move around earnings then I could do one of these 3 strategies, but volatility is usually high then so these strategies become expensive and if volatility drops after earnings that can eat up the gains made in the price movement of the underlying; if it doesn't move far enough. Straddles and Strangles aren't guaranteed to win, they have risk. But if I can lower the risk of a loss at the price of a smaller return with a RIC then I might be interested in doing that. But I'm sure someone has done this before.
I have a mentorship with TradersEdgeLive, and I found a guy on SeekingAlpha who has done it as well and I've sent them my questions as well. Just though I'd post it here to see if I could get any extra feedback.
In other words buy two ATM options (+1 PUT and +1 CALL) and sell (-1 CALL) one strike up and sell (-1 PUT) one strike down. The result was about a 10% gain with a breakeven range one strike above and below the center. It's cheaper than both the Straddle and Strangle, has less chance of losing but a lower return.
If I expect a large move around earnings then I could do one of these 3 strategies, but volatility is usually high then so these strategies become expensive and if volatility drops after earnings that can eat up the gains made in the price movement of the underlying; if it doesn't move far enough. Straddles and Strangles aren't guaranteed to win, they have risk. But if I can lower the risk of a loss at the price of a smaller return with a RIC then I might be interested in doing that. But I'm sure someone has done this before.
I have a mentorship with TradersEdgeLive, and I found a guy on SeekingAlpha who has done it as well and I've sent them my questions as well. Just though I'd post it here to see if I could get any extra feedback.
Quote from jkgraham:
What's a reverse condor? Well it doesn't appear to be very common but that's one thing Iâm curious about. Basically turn the Iron Condor upside down and move the wings in as far a possible toward the center.
In other words buy two ATM options (+1 PUT and +1 CALL) and sell (-1 CALL) one strike up and sell (-1 PUT) one strike down. The result was about a 10% gain with a breakeven range one strike above and below the center. It's cheaper than both the Straddle and Strangle, has less chance of losing but a lower return.
If I expect a large move around earnings then I could do one of these 3 strategies, but volatility is usually high then so these strategies become expensive and if volatility drops after earnings that can eat up the gains made in the price movement of the underlying; if it doesn't move far enough. Straddles and Strangles aren't guaranteed to win, they have risk. But if I can lower the risk of a loss at the price of a smaller return with a RIC then I might be interested in doing that. But I'm sure someone has done this before.
I have a mentorship with TradersEdgeLive, and I found a guy on SeekingAlpha who has done it as well and I've sent them my questions as well. Just though I'd post it here to see if I could get any extra feedback.
So buying the body, selling the wings.
Would he be better off buying the same amount of premium in just straddles or stangles (less size, but unlimited potential).
Quote from jkgraham:
In other words buy two ATM options (+1 PUT and +1 CALL) and sell (-1 CALL) one strike up and sell (-1 PUT) one strike down. The result was about a 10% gain with a breakeven range one strike above and below the center. It's cheaper than both the Straddle and Strangle, has less change of losing but a lower return.
If I expect a large move around earnings then I could do one of these 3 strategies, but volatility is usually high then so these strategies become expensive and if volatility drops after earnings that can eat up the gains made in the price movement of the underlying; if it doesn't move far enough. Straddles and Strangles aren't guaranteed to win, they have risk. But if I can lower the risk of a loss at the price of a smaller return with a RIC then I might be interested in doing that. But I'm sure someone has done this before.
I have a mentorship with TradersEdgeLive, and I found a guy on SeekingAlpha who has done it as well and I've sent them my questions as well. Just though I'd post it here to see if I could get any extra feedback.
If you're betting on volatility, why contradict yourself and cap the profit? The whole point of going a long straddle or strangle is you know for sure the stock will get naughty.
And if it doesn't move, you'll close out your position anyways- it's asinine to hold on to an underlying that just chills out if you're long.
So if your goal is to reduce the losses- the best way to do that is to be prudent and check your positions frequently. Selling further out options to reduce risk is just frankly lazy. And btw, the stock will still have to move a desired amount before you make any money anyways. So that further invalidates the need for short options on your straddle/strangle.
In my experience, the only reason you wanna cap your upside with a vertical is if it is a very short term directional bet.
Quote from babutime:
The whole point of going a long straddle or strangle is you know for sure the stock will get naughty.
Well I don't know the stock will get naughty "for sure" and even if the stock does move a lot after earnings if the implied volatility drops and the option prices drop that can cause the Straddles and Strangles to lose or breakeven while the RIC can still win but you would have to wait and exercise them instead of selling them back on the market for the gain. Thus it seems that it would be better to use weeklies and have less time to wait before execution. Again itâs trading return for a higher probability of success.