Iron Condor

If you're new to our site, make sure to watch our FREE TRADING OPTIONS FOR INCOME VIDEO by Clicking Here. Thanks for visiting!

At the core of the iron condor strategy is the vertical spread.

If we were to reverse engineer the iron condor strategy - take it apart - split it in half - and look at what the spread is actually constructed from - we would find that it is simply 2 credit spreads. A vertical spread on either side.

Usually the iron condor trader will construct their trade anywhere from 1 to 3 months away from expiration day. For example - if an iron condor trader were setting up a March trade - the trade might be initiated as early as Jan of that year. I think most iron condor traders would agree that this might be as far away from expiration one might want to place this type of trade - and it seems as though most prefer to place them much closer to expiration day - usually somewhere in the 30 to 40 day range.

To place an iron condor trade - the investor would either sell 2 separate vertical spread - or credit spread - an equal distance away - or out of the money - from where the ETF they are trading with is presently trading at.

For example - if the investor were placing an iron condor on the SPY - they would sell a call vertical spread above where the SPY is trading at - and they would sell a put vertical spread below where the SPY is trading at.

These two individual credit spreads can be sold either one at a time - which some refer to as ‘legging in’ - or some brokers allow them to all be placed together as a full iron condor ‘package’.

photo credit: Orin Zebest

Technorati Tags: Butterfly Spread, Credit Spread, Iron Condor, iron condor spread, iron condors, option selling, option spread trading, Vertical Spread

Related Iron Condor Info:

1. condor spread The condor spread is one of the lesser known...
2. Option Selling Option selling has become more main stream recently as...
3. Credit Spread Option At the heart and soul of the iron condor...
4. Option Spread An option spread that has gained a lot of...
5. Option Spread Trading Several different option spread trading strategies which investors can...