Re: [ConservativeOptionStrategies] Re: Iron Condors - Conservative Strategy?

 

Basically, an Iron Condor  is conservative in that your risk is limited.  On the other hand, so is your gain.  So it all comes down to the probability of winning and the ratio of avg winning trade vs. the avg losing trade....which all gets back to your view on the underlying.   Look, no strategy is Conservative if you keep losing.  A string of small losses can make you just as poor as a big loss.  It may even be more psychologically damaging (yes, even us quants have emotions, tho we don't often admit it).  So, it is not so much about your options strategy, although that is important, but it is more about your view of the underlying and the likelihood that your view is correct. Only then can you construct an option trade with risk/reward that makes you comfortable.   Get good at projecting an accurate call on the underlying, and a little extra work will help you fashion a conservative option strategy to exploit that, and limit your risk if you are wrong.   Dom --- On Fri, 2/26/10, StanG <asahi3@hotmail.com> wrote: From: StanG <asahi3@hotmail.com> Subject: [ConservativeOptionStrategies] Re: Iron Condors - Conservative Strategy? To: ConservativeOptionStrategies@yahoogroups.com Date: Friday, February 26, 2010, 7:45 PM   Hi, OptionsMike, It's quite difficult to trade with rules like - "1. Make sure the sold call on both sides of the condor are quite far out of the money". Mainly because it's pretty meaningless. It should be something much more concrete like - 1)"at least one Standard Deviation from the live price." or "having a Delta of .02 or less" or "having a probability of 80% of closing below (above, depending on side) that strike". Also 2)the market should be in a non-volatile state. 3)The strikes on the Credit Spreads should also be one, to at most three apart. This is to control somewhat the effects of Delta. It is probably better to trade the IWM versus the RUT because the RUT strikes are ten points apart. The trade off is more contracts for a given return i.e. more in commissions but easier to adjust if required. Have a good week-end, Folks... Stan --- In ConservativeOptionS trategies@ yahoogroups. com, "optionsmike" <michael@... > wrote: > > Hi Tom, > In my opinion, iron condors can indeed be a conservative options strategy especially with the following three caveats in mind: 1. Make sure the sold call on both sides of the condor are quite far out of the money, 2. find a range-bound stock or ETF without too much volatility, and 3. keep you commissions rock-bottom low. Hope this is useful to you. > > Michael > www.safe-options- trading-income. com > > > --- In ConservativeOptionS trategies@ yahoogroups. com, Tom Clark <tec@> wrote: > > > > Are Iron Condors considered enough of a conservative strategy for > > discussion here? > > > > If so than I can only assume that some readers of this group may use > > IC's. I am considering expanding my use of options to include Iron > > Condors and I'm looking for a mentor. I'm not looking for someone to > > teach IC's, I've got the general idea, I just want someone with whom > > I can bounce trade ideas off of and who might just keep me form going > > off the deep end. All of this would be off-line from the group. If > > interested drop me a private email. > > > > Thanks > > >

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