However, since I am bearish on the market over the short term, I want to increase my probability of success slightly. Next, I take a look at the put side with the same goal in mind: a probability of success of around 80% or higher. The June 18 th 432 calls fit the bill, as it has an 81.16% probability of success. I want to find the short strike with an 80% probability of success. I typically like to start with a trade that has a probability of success around 80%, if not higher.įirst, I look at the call side of the iron condor, also known as a bear call spread. Highly liquid, in the options world, just means that the bid-ask spread is tight, say within $0.01 to $0.10, at least in most of the ETFs I trade.įor instance, take the heavily traded SPDR S&P 500 ETF (NYSEArca: SPY). The first requirement when trading iron condors is to make sure you are using a highly liquid security, in most cases an ETF. Increasing the range will decrease your potential profits but will increase your likelihood of success. The basic premise of the iron condor strategy is easy. You choose the price range of the trade. A Bearish Iron CondorĪn iron condor strategy is a non-directional options strategy that profits when the option on the underlying stock or exchange-traded fund of your choice expires within your chosen range at expiration. Here’s my step-by-step approach to iron condors in basic terms. Just keep in mind, the higher your expected return, the higher the risk. The best part is that we have the ability to choose our return. It generates above-average profits when the underlying security remains range-bound for the duration of the trade, which in our case is typically 30 to 45 days. Take for instance the iron condor: an options strategy that thrives when the market goes nowhere. Unlike most investors, we have the ability to structure our positions in a way that generates profits regardless of the direction of the underlying stock or ETF. It does not store any personal data.As I always say, we, as options traders, have the ultimate advantage over other investors. The cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. The cookie is used to store the user consent for the cookies in the category 'Performance'. This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category 'Other. The cookies is used to store the user consent for the cookies in the category 'Necessary'.

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Here are some tips to use the filtering function to find the best Iron Condor entry points. Options Scanner is designed to find high probability and high return Iron Condors in seconds. Options Scanner Settings to Find the Best Iron Condor Stocks We can do that by picking stocks with high market capitalisation to reduce the risk of manipulation.

We also need to find underlying opportunities less prone to large fluctuations.

Since we want to sell high and buy low, we need to sell to open at high IV, then buy to close when vega causes the option's value to decay at low IV. Vega is the changes to options value with respect to changes in IV. So no matter our Iron Condor setup is profitable or not, we prefer to close the trade or roll it to the next month before 14 days to expiration, to reduce gamma risks. Gamma grows when the options are close to expiration, leading to big fluctuations in options value. It is also the acceleration to options prices with respect to changes in stock price. Gamma is the changes to delta with respect to changes in stock price. So we can be patient and earn a profit as time passes without much price fluctuation. Theta is the changes to options value with respect to changes in time.įrom our experience, selling OTM options with more than 30 days to expiration have a predictable time value decay. When selling Iron Condors, we want both theta and vega to depreciate the options prices, so we can sell high price Iron Condors to open, and buy low price Iron Condors to close.

Iron condor example