This iron condor strategy seems to be a sure thing for small profit.

F

frank99

This strategy seems to be a sure thing - although small profit. What am I missing?

Rather than explain it, I will give an example for stock xyz:

Sell a 110/111 Vertical Call Spread for .45

Sell a 108/109 Vertical Put Spread for .70


The max loss on each side is $100. However, I'm bringing in $115 in premium.

The max possible loss is $100 for this position completely since the stock can only close on one side.

Is this possible to implement and return a profit? Any feedback would be appreciated.

Thanks,

Frank
 
Quote from frank99:

This strategy seems to be a sure thing - although small profit. What am I missing?

Rather than explain it, I will give an example for stock xyz:

Sell a 110/111 Vertical Call Spread for .45

Sell a 108/109 Vertical Put Spread for .70


The max loss on each side is $100. However, I'm bringing in $115 in premium.

The max possible loss is $100 for this position completely since the stock can only close on one side.

Is this possible to implement and return a profit? Any feedback would be appreciated.

Thanks,

Frank
More...

Unless, you're legging in, you will never sell a 1-point iron condor for more than 1 point as that would be a risk free trade and there aren't any!
 
Quote from frank99:

This strategy seems to be a sure thing - although small profit. What am I missing?

Rather than explain it, I will give an example for stock xyz:

Sell a 110/111 Vertical Call Spread for .45

Sell a 108/109 Vertical Put Spread for .70


The max loss on each side is $100. However, I'm bringing in $115 in premium.

The max possible loss is $100 for this position completely since the stock can only close on one side.

Is this possible to implement and return a profit? Any feedback would be appreciated.

Thanks,

Frank
More...
As mte said, it's a sure thing if you can leg it for those credits. Have you actually tried placing this order as an iron condor and not two separate spreads? If so, what was the bid/ask?
daddy's boy
 
If you really want a sure winner execute an IC trade on the SPX index. This index does not experience the wild swings an individual stock can make in a month. If you study the monthly starts and finishes of the SPX index you will see what I mean. Just be conservative and execute FOTM spread trades and relax. It's boring but you will have consistent winners. And adjusting when the Index approaches one of your short positions is easy and allows you to break even and sometimes your new credit more than offsets the debit.
 
I haven't actually tried placing this order. I did find a trade that meets this criteria, however, I used the midprice between the bid/ask. If you pay the ask and sell at the bid, it comes out to $95 instead of $115.

Quote from daddy'sboy:

As mte said, it's a sure thing if you can leg it for those credits. Have you actually tried placing this order as an iron condor and not two separate spreads? If so, what was the bid/ask?
daddy's boy
More...
 
I haven't traded SPX yet - only SPY.

This sounds like a good match. I'm looking for consistent winners. How much margin is required for an IC trade on the SPX index?

Thanks,

Frank

Quote from FitForLife:

If you really want a sure winner execute an IC trade on the SPX index. This index does not experience the wild swings an individual stock can make in a month. If you study the monthly starts and finishes of the SPX index you will see what I mean. Just be conservative and execute FOTM spread trades and relax. It's boring but you will have consistent winners. And adjusting when the Index approaches one of your short positions is easy and allows you to break even and sometimes your new credit more than offsets the debit.
More...
 
Quote from frank99:

I haven't actually tried placing this order. I did find a trade that meets this criteria, however, I used the midprice between the bid/ask. If you pay the ask and sell at the bid, it comes out to $95 instead of $115.
More...

Once again, unless you leg in, you will never get a fill on such an Iron Condor order as that means a sure loser for the other side!

Btw, always make sure the options you are looking at are standard options and not adjusted ones, as in that case the normal pricing doesn't apply and there can be aparent mispricings, which in reality are not!


Quote from frank99:

I haven't traded SPX yet - only SPY.

This sounds like a good match. I'm looking for consistent winners. How much margin is required for an IC trade on the SPX index?

Thanks,

Frank
More...

Consistency comes from your trading approach not the type of option spread you use!

The margin requirement on an IC on SPX is exactly the same as the one on SPY - Difference between the strikes less intial credit.
 
Quote from frank99:

I haven't traded SPX yet - only SPY.

This sounds like a good match. I'm looking for consistent winners. How much margin is required for an IC trade on the SPX index?

Thanks,

Frank
More...

Frank I certainly wouldn't talk you out of the SPX as it can be very profitable....however you might read the 1st couple hundred pages of coach's SPX thread to get a feel for what can happen...last OCT, NOV etc...you also have to prepare to constantly bend over to the Market Makers...getting fills when you need them the most:mad:
 
ICs require an aggressive adjustment strategy. Be prepared to close or hedge the position quickly if the underlying or vols move. Expect around a 1.50 credit for 10 point SPX spread around 3 sigmas OTM (assuming current implieds). Selling cheap gamma is like not wearing you're seat belt. The majority of times you'll be ok but it only takes one time to kill you.
 
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