Reverse Iron Condors

Quote from spindr0:

If you model some of these EA plays, you may find that you need to write a new ending to your story. Moving one strike is nowhere the money maker that you think it is.
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Then something must be wrong with the profit-loss graph displayed by TOS for this trade which has happened to me before due to operator error; but it shows a profit on this trade at expiration if the underlying moves above or below the options that were sold. Until I find something wrong with the TOS P/L graph I think the end to story is correct.

The RIC is capable of making a profit. Are you saying that I am wrong about the time and price at which that profit occurs?

I think that the RIC is the mirror image of the IC.
- The IC is a credit/selling strategy; the RIC is a debt/buying strategy.
- The IC gains max profit at expiration if the all options expire worthless, the RIC gains max profit at expiration if one credit spread expires ITM and is exercised.

If I pay $4.50 for an RIC and make $5.00 if it is exercised then I made $0.50 or 10%.
 
Quote from kinggyppo:

ugh!:eek:
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Exactly the reaction I had.

I seriously think he's just messing with us. He's like George Bush- smart on the inside but acts all dumb on the outside so he can confuse people into believing so. Meanwhile he quietly makes money while laughing.

Tell me I'm right?

Noone can be that misguided. Noone.
 
Quote from jkgraham:

Then something must be wrong with the profit-loss graph displayed by TOS for this trade which has happened to me before due to operator error; but it shows a profit on this trade at expiration if the underlying moves above or below the options that were sold. Until I find something wrong with the TOS P/L graph I think the end to story is correct.

The RIC is capable of making a profit. Are you saying that I am wrong about the time and price at which that profit occurs?

If I pay $4.50 for an RIC and make $5.00 if it is exercised then I made $0.50 or 10%.
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If a spread's intrinsic value at expiry is greater than it's cost, you have a profit. But what does that have to do with your initial question which was "Has anyone ever bought Reverse Iron Condors before earnings?" and your follow up statement of "If I expect a large move around earnings ...".

I repeat what I said earlier. If it's a short term earnings play for an expected large move , the IV contraction, slippage and commissions, and short option drag is going to makes this a small winner, if at all, for a one strike move.

If it's merely an expiration play sometime after an EA and you're paying $4.50 for your $5 spread, AFAIK, a max profit of 50 cts is a lousy risk ratio since you have to be right an awful lot.

It would also be helpful if you got on the right page with terminology. A straddle for the body with OTM wings (strangle) is a butterfly. If the body's strikes are different then it's an IC, long or short.
 
Quote from spindr0:

If a spread's intrinsic value at expiry is greater than it's cost, you have a profit. But what does that have to do with your initial question which was "Has anyone ever bought Reverse Iron Condors before earnings?" and your follow up statement of "If I expect a large move around earnings ...".
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I was wondering if anyone here had used a RIC around earnings because it can make money if the underlying moves enough. It appears to me that it is safer because it doesn't have to move as much as the other earnings play at the cost of having a lower return. It also appears that you may have to wait till expiration to get all the profit, that's why it appears that weeklies would be better. But I haven't done one yet so I asked if anyone here has any experience with them.

Quote from spindr0:
I repeat what I said earlier. If it's a short term earnings play for an expected large move , the IV contraction, slippage and commissions, and short option drag is going to makes this a small winner, if at all, for a one strike move.

If it's merely an expiration play sometime after an EA and you're paying $4.50 for your $5 spread, AFAIK, a max profit of 50 cts is a lousy risk ratio since you have to be right an awful lot.
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Yes it will be a small winner but 10% may be enough if it wins more often. Which is another reason I asked for someone with experience to chime in and discuss if the trade of was worth it.

Quote from spindr0:
It would also be helpful if you got on the right page with terminology. A straddle for the body with OTM wings (strangle) is a butterfly. If the body's strikes are different then it's an IC, long or short.
More...
Sorry if I got any terminology wrong, I'm trying. I had not heard of Convexity, so I asked what it was. What else are you saying I had wrong? Is Reverse Iron Condor not right?
 
Quote from jkgraham:

What's a reverse condor? Well it doesn't appear to be very common but that's one thing I’m 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.
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IOW, that's a butterfly.
 
Quote from newwurldmn:
You are the guy who hears someone bought a buck of delta and think they own a deer.
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Ta-dam-pam!!! I think I need to pulll you off-stage with a cane...
 
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Quote from spindr0:
I repeat what I said earlier. If it's a short term earnings play for an expected large move , the IV contraction, slippage and commissions, and short option drag is going to makes this a small winner, if at all, for a one strike move.

If it's merely an expiration play sometime after an EA and you're paying $4.50 for your $5 spread, AFAIK, a max profit of 50 cts is a lousy risk ratio since you have to be right an awful lot.
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Quote from jkgraham:

Yes it will be a small winner but 10% may be enough if it wins more often. Which is another reason I asked for someone with experience to chime in and discuss if the trade of was worth it.
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And what kind of stop loss will you run if the stock goes nowhere? Will you be disciplined enough to close at down 1 pt? Or ride to down 2 while hoping for BE? And what if you catch the rare dog that sits near the center strike until expiry and loses the $4.50 max? Will you then get 9+ 50 cts winners to break even? If you like those odds, go for it. I don't.
 
the verdict has been passed:

noone here likes Reverse IC.

*Calls the undertaker*

"I got a couple cases of Reverse ICs here...yeah? tonight??... oh right away? .... sure, im bringing him right away....Thanks!"
 
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