subject: Iron Condors When The Dust Settles [print this page] 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.
One thing that got my attention was when he said "Non-directional option trading doesn't mean we can make money in any direction. It means that we make money if the underlying doesn't move in any direction. In other words, it's still a directional trade, sideways." He was right, and it's often advertised that it's easy to make money with options because we can make money on any direction. However, this isn't always the case.
If you're trading Iron Condors, you know what I am talking about; especially if you are trading the Condors that most courses and books teach. If you are trading this strategy in 2009, you probably aren't making anything. That's because the Iron Condor is just as directional as most option trades only that its direction is sideways. It's just as hard to predict a sideways move as it is up or down, for some.
I've received many calls in my time from people losing massive chunks of their accounts trading credit spreads and condors. It's always the same sad song... "I was doing great for several months, and then all the sudden I lost nearly my whole account in one day." I've heard it all, many times.
This is exactly why I don't teach traditional Condors and Credit Spreads. If you are a few days from expiration, and the RUT is right at your short strike, then you are doing it the way most people trade this strategy, and soon you'll be facing the shame of explaining yourself to the spouse! Go ahead, laugh, but it won't seem so funny when it happens to you and your life is in tatters because of this mess of stress you made yourself.
In response to this problem San Jose Options Mentoring has reinvented Iron Condors and Credit Spreads. The less you have to adjust your condor, the better off you will be in most cases and we have a different technique which gives the underlying much more flexibility, lowering our stress level and keeping us out away from a disastrous scenario.
We've developed safer techniques to trade and lock-in our profits on Condors. Most option traders exit their trades after they make a profit, but we can lock-in our profits and stay in the trade.
When you get right to it, if we ever have a Condor move against us, then we have developed a backup plan which gives us a free bonus trade! So, even though we may experience an undesirable month, we still get an excellent, free trade while most traders just take the fall and crawl away.
In the best of days and worst of days, we stand by the techniques we've developed in the Iron Condors and other Strategies.
