This is it... There's nothing more that needs to be said on the subject (plenty more can be said, but it becomes a philosophical discussion).
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What's wrong with Iron Condors
- Thread starter jb514
- Start date
Quote from jb514:
At the moment my view on the strategy, is that it is disliked for the wrong reasons. I think people frown upon condors mainly because of the bad traders that trade them, not for any strategic reason.
The point is that there is nothing wrong really with any strategy, they all work under the right circumstances if recognized by the trader and used accordingly. The main problem with Iron Condors is that most traders simply slap them on month to month without any regard to the market conditions, changes in volatility, or analysis of price action. For example, a short straddle is a good strategy in the right curcumstances which I use from time to time but I would not slap one on every week blindly or every 3 weeks no matter what, expecting it to perform the same under changing conditions.
It's amazing that none of these credit spread/iron condor threads ever ask the most obvious question 'when is a good time to get long/short vol?'. There are plenty of threads that discuss when to go long/short the underlying, but I can't recall reading one about vol -- once options are involved the discussion inevitably turns to magical mindless structures. Ironically, one could argue that 'predicting' vol is easier to do than picking stock direction (although the testing and execution of vol edges are a much bigger headache). If Howard wasn't so arrogant, he would have started a thread like that initially rather than trying to promote his goofy method. Some of the most generous guys on this board are the option guys (atticus,sle,mav,martinghoul,asiaprop,sonoma,cachelanding) and they just might have given him enough crumbs to develop a real edge with...too bad.
I think it has to do with absence of scientific thinking for most people. And you are right, I (and I could probably speak for Marty) would be happy to explain basic vol arb concepts here, but nobody seems to care.Quote from bs2167:
There are plenty of threads that discuss when to go long/short the underlying, but I can't recall reading one about vol -- once options are involved the discussion inevitably turns to magical mindless structures.
Quote from sle:
I think it has to do with absence of scientific thinking for most people. And you are right, I (and I could probably speak for Marty) would be happy to explain basic vol arb concepts here, but nobody seems to care.
Start a thread and I will read it. Hopefully the trolls and assholes will stay off it. (Probably too much to hope for.)
I agree with Howard, shouting blanket statements is less than worthless.
I also wanted to add that Thinkorswim used to put on free seminars touting the use of ICs. They had specific rules for when to put open and close them, but AFAIK they suggested doing them every month on index ETFs. Don't know if they still promote them, this was 4 or 5 years ago. And I think the "adjustments" were adding new ones if the market moved. Of course at 8 legs' worth of commissions I'm sure they loved it when the customers used them.
Rather than making him do the work, I will start a journal of sorts that explores/tests a few different vol edge ideas. Hopefully, sle and some of the others mentioned will contribute with opinions or when they see things they do/don't like. Only catch is that I'm leaving for a trip tomorrow, so it will have to wait until next week. Ideally it would develop into a thread where legitimate vol trading ideas are properly analyzed so that the next 100 times a condor thread gets started, the OP could be directed there for a resource...ultimately should save a lot of man hours and bandwidth. Unless, of course, you'd rather start one, sle?
It would have been a great idea about a month ago when I was at the hospital and was bored out of my mind. Now its a bit harder since I am back to work and have to actually trade and research new trade ideas. How about we just open a pure vol trade thread and keep chatting about it? Does not have to have live trade ideas, but more like "why would you want to sell vega and buy gamma here in blah-blah".Quote from Eliot Hosewater:
Start a thread and I will read it. Hopefully the trolls and assholes will stay off it.
I would rather wait for someone to start one, not sure what exactly would be of interest to people.Quote from bs2167:
Ideally it would develop into a thread where legitimate vol trading ideas are properly analyzed so that the next 100 times a condor thread gets started, the OP could be directed there for a resource...ultimately should save a lot of man hours and bandwidth. Unless, of course, you'd rather start one, sle?
Quote from bs2167:
Ideally it would develop into a thread where legitimate vol trading ideas are properly analyzed so that the next 100 times a condor thread gets started, the OP could be directed there for a resource...ultimately should save a lot of man hours and bandwidth. Unless, of course, you'd rather start one, sle?
Good idea, a good read for noobs is SPX Credit Spread Trader, lengthy but worthit for optioncoach/atticus/Mav74 contributions. Note it was prior to '08 volatility.