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Iron Condors and Credit Spreads: Secrets to Make Consistent Returns With Option Trading

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By Donald Scott


I had an interesting conversation with an option trader today who is still searching for the secret to making consistent returns with option trading. He said many things that I absolutely agreed with.

He got my attention when he began to talk, saying, "We can't make money in any direction when using non-directional option trading. We make money only if the underlying doesn't move in either direction. Even though it is sideways, it is still considered a directional trade." On this point he was correct because we can make money in either direction so long as we understand that the underlying must trade within a narrow range, almost not moving at all.

When trading Iron Condors, especially if you are trading the type of Condors that most books and courses teach, you understand what I am talking about. By trading with this strategy in 2009, it is reasonable to assume that you are not making anything. The reason for this is that the Iron Condor is directional when it comes to option trading, yet that direction is sideways. With a sideways move, it is just as difficult to predict as a move which occurs up or down.

Over the years I have received several calls from people who ended up having large chunks taken out of their accounts because of trading credit spreads and condors. The story is always the same... "For several months everything was going great when suddenly I nearly lost my entire account in one day." I have heard this over and over.

I don't trade the popular Condors or Credit Spreads precisely because of this reason. Many people believe in trading this way until they are a few days away from expiration and their short strike is about to hit. If this happens, soon you may be trying to hide the truth from your wife or telling the same story to your best friend. As funny as you may think this is, you won't even chuckle when this happens to you. This style of trading can also contribute to a high stress level which can ruin your life.

San Jose Options Mentoring has redesigned Iron Condors and Credit Spreads in order to combat this problem. To help me keep a lower stress level as well as to avoid any dangerous situations, they have taught me how to use different techniques so that I am able to give the underlying more wiggle room. In most cases, the less adjusting you have to do to your condor the better off you will be.

I was able to capture profits on Condors by using the techniques which they had developed. From them, I was able to learn how to lock-in my gains and, unlike many other option traders who leave after having made a profit, I was able to stay a little longer in the trade.

If a Condor should ever move against me, by using the techniques which were taught to me I will be able to morph into a new position and make adjustments to keep me in the game! When most traders would bite the bullet and move on because of a bad month, I will be able to get an excellent, free trade from it.

Win or lose, along with the other strategies which I have developed, I will be able to trade Iron Condors impressively.




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