Iron Condor Spread is the combination of a Bullish Vertical Credit Spread and a Bearish Vertical Credit Spread on the same underlying asset. Depending on how the spreads are constructed, option traders will potentially be able to obtain twice the collect premium over a single spread position. Since there are bullish and bearish spreads involved in the Iron Condor Option Trading Strategy, there is an upper break even and a lower break even point. Profit is realized when the underlying asset remains above the lower break even point or below the upper break even point. In other words, as long as the price of the asset is above your bullish short strike and below the bearish short strike, the option trader will profit from both spreads through time decay. This strategy can be used regularly on a monthly basis to consistently generate a healthy cash flow in your trading business.
Time decay erodes the value of option prices. There are not many option traders who understand the benefit with trading spreads because it simply looks too complicated. Well, it is not nifty option trading.
Iron Condor Spreads is a market neutral strategy that has positive time decay and negative gamma with limited risk. Traders with any level of option trading experience can use this trading approach. Depending on your brokerage expertise and software, these spreads should be available electronically with single click functionality. Some brokers may even provide better leverage when you trade Iron Condor with them.
The IronCondorSpread Newsletter was designed to identify low risk option trading opportunity when an index remains in a narrow trading range during the current expiration cycle. Holding period is always not longer than 60 days.
In trading, the only objective is to make money. As a trader, you should not into big gains or excitement. Constructed correctly, the iron condor spread can be a consistent income generator. Before getting into new positions, you should look for positions that have an extremely high percentage of profitability. If you have the odds of winning in your favor. you will likely be profitable in the long run.
To do so, look specifically for options that have a relatively higher level of volatility. This means to look for positions that are over priced. Establish a trade positions that you believe that the underlying asset will not move to anywhere new your short strike.
To achieve consistent profit, our Iron Condor positions will always have a wide profit range on the underlying asset. So, in the event that the underlying moves up, down or even sideways, you will always profit with time decay. Having a large profit range is important because it will almost certainly guarantee that we will profit consistently and also it does not require us to spend a lot of time to monitor our open positions. We like the idea of trading with little stress and with little work. Our usual profit target for each Iron Condor spread is 13% to 18%. Profit is usually realized within 60 days.
Iron Condor trading is an effective trading strategy because it is a limited risk approach. You will never lose more that you have allocated for each trade. Although it comes with a high probability of winning, losses can be kept low when the trade moves against you. As rare as losing month may be for us, keeping losses low is the key to any successful trading strategy. While making money is important, capital preservation is equally or more important.