So I decided to branch out and try another strategy today ... Iron Condors (IC). I've been thinking about doing one for a while now and decided I needed to just do it :-). The markets seem to be running out of steam, so I figured now would be a good time to open up the upper 1/2 of the trade (Bear Call Spread). I will open the lower 1/2 of the trade (Bull Put Spread) once it looks like the markets have bottomed out, or at least moved lower. This is something pretty new for me, so I am by no means an expert. I did take a 2hr online course on "Siamese" ICs about a year ago, but they are a bit different than the normal IC.
The basic idea behind an IC is that you make money when the underlying stock/index stays within a certain range. A good hedging strategy for long strangles, since they need the underlying to move outside a specific range to make a profit. I'm going to experiment with a few ICs and see how they work for me. If any of you out there are trading them please let me know what you're doing and how it's working for you!
OXY May 55P/70C ~$12.00/contract
- I'm going to enter an order on this one for $0.30 move in either direction on the stock (OXY moves down I buy put, OXY moves up I buy call)
MS had a nice run up yet. Still not profitable on the calls yet though.
2 comments:
A bull call spread tends to be profitable when the underlying stock increases in price. It can be established in one transaction, but always at a debit (net cash outflow). The call with the lower strike price will always be purchased at a price greater than the offsetting premium received from writing the call with the higher strike price. Maximum loss for this spread will generally occur as the underlying stock price declines below the lower strike price. If both options expire out-of-the-money with no value, the entire net debit paid for the spread will be lost. Alexander Shlepakov
@Anon (Alexander) That is correct, but for the purposes of an iron condor you use the bull put spread which is a credit spread (cash inflow for opening the trade). This is why you want the underlying equity to remain above the spread and expire worthless.
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