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Common Abused Iron Condor Spread: Option Trading Strategies and Tricks

By Ted Nino


Of all the various option spread strategies out there, the iron condor strategy is perhaps one of the most popular, the most talked about, the most used (or misused) - and possibly the most dangerous and misunderstood option strategy of them all.

The thing is, when rookie option traders first hear of this strategy (perhaps from a late night infomercial or free hotel seminar conducted by slick salesmen touting it as the greatest thing since sliced bread) - very few seem to able to resist the temptation to jump right into trading them head first - with actual real hard earned money on the line - and usually way too much of it.

And it seems that a good percentage of them - if not most of them - promptly wind up getting their groins kicked in, their heads ripped off, their eyes poked out, and getting hurt really, really bad.

Now stop.

Let me explain something here before you start to get the wrong impression.

I LOVE iron condors.

I think the iron condor really IS a great trade.

And all those stories and claims about making 5 to 10 percent a month while barely spending any time looking at market - and how the odds are so unfairly on the side of the iron condor trader - and how trading iron condors is just like becoming the 'house' instead of the gambler - yes - I believe all those claims and stories too. In fact, not only do I believe those stories - I KNOW they are true - because I experience it myself first hand on a regular basis.

The big problem is that there is some very important information being left out of those iron condor claims and stories. Information that I'm sure would keep a lot of rookie option traders - who frankly just don't know any better - from blindly making that 'over-confident' leap into the iron condor abyss.

See what isn't being talked about with iron condors is that while yes, they can provide great monthly returns and high probabilities of winning- they also come attached with a horrendous risk to reward ratio - sometimes as poor as 10 to 1!

This means that in order to achieve those 80 to 90 percent probability trades - you need to risk ten dollars to make just one - or to be more realistic - you need to put at risk $10,000.00 for the chance to make just $1,000.00.

And as my dear old mammy used to say: 'that smells a lot like an awful bad egg'. Which in fact it is. That risk to reward ratio is nothing but a low down, no good, smelly rotten deal!

Even with the ten percent monthly returns and the high probabilities - all that needs to happen is for a problem month to come along (and it WILL, believe me) - and the next thing you know you'll be staring at a gigantic loss and a zero balance account!

However...

There is still hope...

Because - as I wrote previously - I REALLY DO like the iron condor strategy.

It's one of my favorite trades - and it continually generates profits for me.

So apparently, even with that atrocious risk to reward quandary, there must be a method to generate consistent income with this trade.

And yes, there certainly is.

It's all in how you manage the trade.

As soon as you discover the 'right way' to place these trades initially - and then how to properly go about managing and adjusting them - that risk to reward dilemma instantly vanishes and goes away.

You just need to take the time BEFORE jumping into the iron condors pool to equip yourself with this little bit of knowledge. A few simple 'tricks of the trade' - so when those problem months DO come along (and they WILL believe me) - you will know exactly what you need to do to immediately squash that threat, easily adjust yourself out of the problem, and experience the iron condor for all it's 'really' cracked up to be.




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