The Option Income ‘Cash Grab’
A great iron condor adjustment technique that works with good success is to ‘mix up’ weekly options with the standard monthly options when running our regular ‘bread and butter’ income trades.
For example in one of our recent options trading lab paper trading case studies - the trade went on as just the standard iron condor spread. But, thanks to the big huge unrelenting run up in the RUT that we saw – we reached a point where we needed to apply adjustments on the up side of the trade.
At a certain point during this adjustment process – our trade was a bit lop-sided as we were removing spreads that had diminished in value. During this process there came a point where all the put credit spreads were removed – leaving he position with a risk graph that looked like just a plain call side credit spread. This was on Friday – with the weekend ahead – and still a few weeks until the standard monthly option trading expiration.
This presented a great opportunity to try and take advantage of some potential weekend time decay – however we weren’t really ready to sell some additional put credit spreads as the run up had been so big it seemed as though a pull back was inevitable – and selling a standard monthly put credit spread just seemed to potentially ‘stick us in the game’ for too long. If there was a pull back we would most likely need to start messing and adjusting the new put credit spread and probably do so until expiration day.
The put weekly options though provided a whole different opportunity.
Using the weekly options to sell either a ‘full load’ put credit spread set – or even just a few additional put spreads – would be ideal. It could give us just that little extra ‘boost’ of potential cash flow from quick weekly options time decay – a situation where we could just sell a few extra put spreads – get that quick credit into the account – and then get rid of them early the following week.
Again, weekly options are ideal for this. Yes it is true that you will likely not get as far away from where the underlying is trading at then when using the longer term monthly options – but on the other hand these weekly options will bleed away at a much faster pace – and when positioned correctly you should be able to make your quick cash grab and then get the heck out before the underlying is able to cause any serious damage.
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