Trading Iron Condors

[MTE]

Quote from Kpetrey:

Thanks. I know I'm not ready to leg in, but just like to understand the basics and what one looks for when legging in?

Basically you are looking for market swings to either sell a call or a put vertical first and then complete the iron condor on the opposite move. You can also leg in using a short and a long strangle, or even build it from 4 separate trades.

The key is obviously timing the market correctly, hence my comment in the previous post. That is, if you can time the market then why the heck would you even bother with iron condors.

 

[spindr0]

Quote from Kpetrey:

Thanks. I know I'm not ready to leg in, but just like to understand the basics and what one looks for when legging in?

Legging in simply means trying to get a better fill by executing individual components of the position one or more at a time.

For example, with the IC, you're selling an OTM put and call spreads. If the market is moving up, the put spread will decline in value as the call spread increases. Sell the put spread first and try to catch a larger credit for the call spread. You had better be ready to pull the trigger quickly if the underlying reverses.

In this example, neither side is naked. If you're going to leg into one side, always execute the long side first unless you're disciplined and experienced.

 

[spindr0]

Quote from MTE:

Basically you are looking for market swings to either sell a call or a put vertical first and then complete the iron condor on the opposite move. You can also leg in using a short and a long strangle, or even build it from 4 separate trades.

For the noobs, set up combo orders for the pair of verticals as well as the pair of strangles. Sometimes you can get a better fill than the natural via one than the other (vertical vs. strangle) when someone offers a little more for a combo.