Iron condor options

Most option strategies are are centered around making the right call on the direction of a stock. This approach relies on the accuracy of guessing the direction of the stock. Thus the chances of profiting are low. By using a combination of Bull and Bear Credit Spread, an Iron Condor position can be created. It will have minimal risk and higher probability of success. With Iron Condor, you don’t need to guess the direction of stock. This strategy is mostly used when we have a neutral outlook on the movement of the options underlying security. It’s a good idea to implement this strategy on security (stock) with low volatility, because their price tend not to move much.

Iron Condors is usually used by traders who seek income from their trading capital. They will construct the posistion so that it will still profit for a much more price movement. For example if the current price is $40, instead of creating a position where it will profit when the price moves up/down $10 (price between $30 – $50), a trader can create a position where he can still profit when the price moves up/down $20 (price between $20 – $60).
By using this strategy, trader would generate monthly income.

Since it is from a combination of bull put spread and a bear call spread, you need to understand them first. The bull put spread is implemented by selling an in-the-money (ITM) put option (has higher price) and buying an out-of-the-money (OTM) put option (has lower price) on the same underlying stock with the same expiration date. While the bear call spread strategy is implemented by selling an in-the-money (ITM) call option (has higher price) and buying an out-of-the-money (OTM) call option (has lower price) on the same underlying stock with the same expiration date. Both bull put spread and bear call spread has limited profit and risk.

If you see the illustration above you can see that we can profit if the price does not move much. If it move much higher or much lower, we won’t profit. You will also see that the profit and loss is limited. 

By Ian Sani

Search terms for the article:

• iron condor strategy
• hoe to construct iron condor option strategy
• implementing iron condor
• Iron Condor Income option strategy
• iron condor options

Click here to learn how to make MONTHLY INCOME with option.

Related posts:

1. Iron Condor Strategy Iron Condor is used when you think the stock has...
2. Directionless spread trading There are various option strategies you can use. Each has...
3. Options strategies for income Generating monthly income from options is a great way to...
4. Collar option payoff Collar option is used when an investor want to lock...
5. Binary Options Strategy Binary option is a simple form of option. It is...