[TheOptionClub.com] Re: Iron Condors

 

I don't think you're missing anything. You sold a short vega position
expecting theta to erode the value of those short options. The trouble
is that implied volatility has taken the value of those options to much
higher levels.

Can you hold the position until expiration? Sure. There is no free
lunch, though...

Right now your concerns are implied volatility and negative gamma.
Holding the position until expiration means that you are risking a
potential market move outside of your position's expiration break-even.
If that happens you then have a position in which implied volatility,
negative gamma, and now negative theta are working against you.

This is where iron condor traders get hurt.

The danger here is that your trade management decisions are based upon
emotions, so be careful that you are thinking rationally and acting in
keeping with your pre-established trading plan. A rule of thumb you
can use is if you find yourself just "hoping" that the market stays
between your break-evens you are no longer trading a plan.

Your goal as an iron condor trader is to avoid taking the big loss. You
can always earn back a few hundred bucks, but when you allow yourself to
take a maximum loss on one of these trades you may not be able to
recover quite as easily.

Christopher Smith
TheOptionClub.com

--- In OptionClub@yahoogroups.com, "vimalbpatel@..." <vimalbpatel@...>
wrote:
>
> Hey guys,
>
> I sold some iron condors when VIX was low. But because market has been
falling, VIX has shot up and because of that option prices have gone up.
>
> Prices are still well between strikes I sold but still my positions
are not registering any profit as options prices are up.
>
> But on expiration, options are going to expire regardless of what VIX
is. So if I hold on to my positions and price does not cross my short
strikes, I will still make money.
>
> But does this make you uncomfortable with your positions as your
positions are losing money every day because VIX is going up ? Or am I
missing something. This is the first time I am trying iron condors.
>

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