Iron Condor
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<< condor spread Option Selling >>
An option selling strategy that has gained a lot of popularity in recent years is the iron condor.
This option spread trading method is comprised of two vertical spreads - or credit spreads - on the same underlying stock / ETF / index. It is made up of an out of the money bear call spread - a credit spread option trade that benefits when the underlying asset remains below the sold short strikes - and a bull put spread on the opposite side of the position.
While there are numerous ways to trade the iron condor option spread trading technique - one popular way is to sell the shorts on either side as far away as possible with the hope being that while the trade is in progress the stock / index vehicle being used won’t reach those levels - which the probabilities say they shouldn’t.
Although it is true that this trade is a high probability trade and when placed correctly the trading asset being used should not breach either sold strike of the trade - of course this is always a possibility - and the risk on these trades can be significant.
Regardless of the favorable probabilities traders of the iron condor option trading strategy should always have a risk management plan in place before putting on these trades.
photo credit: James Byrum
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