Iron Condor Option Strategy: Trading Them the Right Way. // 101 income example explained


Iron Condor Option Strategy: Trading Them the Right Way. // 101 income example explained david moadel welcome to looking at the markets with
David Modell today I’m going to give you my particular strategy for selling iron
condors and I’m sure somebody else’s thought of this strategy somewhere but
I’ve seen a lot of YouTube videos and I’ve never seen anybody else recommended
this particular strategy that I use for iron condors and this is going to be an
advanced video so we’re going to assume that you already have some knowledge of
iron condors alright but basically an iron Condor is just selling a call
spread and selling a put spread now most people sell both at the same
time the call spread and the put spread but I usually don’t do it that way I
will usually leg into an iron Condor I might sell the call spread first and
then if I see a good set up I’ll sell the put spread later on or I might do it
the other way around I might sell the put spread first and then if I see a
good setup I might sell the call spread later on but I usually don’t sell both
at the same time and the reason is because a stock is not going to go up
too much too fast and down too much too fast at the same time it’s going to be
one or the other I don’t generally speaking I will not sell a call spread
unless a stock goes up too much too fast and I will not sell a put spread unless
the stock goes down too much too fast and it’s not going to do both at the
same time and so I’m not going to sell the call spread in the put spread at the
same time but I might do one and then the other for example if a stock goes up
too much too fast and I expect it to retrace then I’ll sell I could sell a
call spread and then later on if the stock turns around and starts to retrace
and go downwards and it goes way too far down too fast in my opinion
and then I think it’s gonna retrace back upwards then I might sell a put spread
alright so I would leg into it or the other way around I’m if I see a stock go
down too far too fast in my opinion and I think it’s gonna retrace and start to
come back up I might sell a put spread first and then if it does retrace starts
to go up and up and up and up too far and too fast then I might sell a call
spread at that point and that would be legging into once again an iron Condor
alright so I’m gonna try to show that visually what that might look like or I
drew a crude looking chart here alright and so this is the price of the stock
let’s say and this is the passage of time and of course you want time to pass
and you want to reach expiration if possible okay now a lot of people will
you know they’ll liquidate their iron Condor they’ll take off their position
you know when when they achieve 50% profit or whatever so you don’t have to
go you don’t have to go all the way to expiration a lot of people don’t and
it’s fine all right so let’s say this the stock price starts here okay and
then you see it start to go up and up and it just keeps going up without any
break it’s going up you know really fast okay and you think well you
know what I don’t think it’s gonna go up much more
okay because probably talking about probabilities here of course it could
just keep going up and up and up but the probabilities are that it’s gonna get
exhausted there’s gotta be exhaustion and there’s a good chance that it’s
either gonna go up a little bit more but then start to turn around or or maybe
it’ll go sideways or best of all it’ll just turn around it and just retrace and
start to go downwards either way you win you only lose if it just keeps going up
and up and up all right which is kind of unlikely especially after it’s already
gone up a lot really fast again no guarantees it could keep going up and
then you lose money so you know there’s always risk all right and if you let’s
say you sell okay so you see go up really fast and really far and
so you sell a call with a strike price right let’s say right here okay you sell
the call with strike price right here and then now could just keep going up
and up and up and you could lose more and more money and so this is selling a
naked call alright or an uncovered call and so let’s say you want to make it a
call spread and so you buy a call here just for protection okay just so you
have a limited loss here alright great and so then let’s say the exhaustion
does start to happen it starts to peter out you know and then it starts to go
sideways great okay you know maybe you could even take off your position here
because some time has passed and you know or you can wait until expiration
your choice now again it’s gone up too far so I’m not going to tell I’m not
gonna sell a put spread at this point cuz it got it hasn’t gone down here and
I expect it to retrace but what if it does retrace and it starts to retrace
really hard really fast and really far well now it’s gone down too far too fast
so now I can leg into an iron Condor I can if I choose to I can sell a put
option here let’s say and right now it’s just a naked put if you just leave it
like that okay so for protection I’m gonna buy if I choose to if I don’t want
to sell a make it put I’m gonna buy for protect for protection a put option with
the price here below it okay so now it’s an iron Condor alright and hopefully
since it went down now too far and too fast too soon
hopefully it’ll start to might go down a little more but hopefully you’ll start
to go sideways and start to retrace and hey you made it all the way to
expiration congratulations and now you collected a premium here on the call
spread and a premium on the put spread alright so again it’s only going to do
one or the other at any given time it’s either gonna go up too far too fast or
down too far too fast not both and so I’m going to leg in to the iron
on door okay and let’s say all right so here’s the beginning of the time period
we’re looking at and let’s say our stock price is going along and then woo down
too far too fast right I mean it’s just really quickly going down and you’re
thinking okay this is getting out of control especially if it’s a good
company all right if it’s a company that you’ve researched and you know that the
fundamentals are fine and this isn’t a market crash or a recession or bear
market it’s normal market conditions and you think it’s going to retrace or at
least you know when something goes down too far too fast too quickly too soon
chances are it’s either gonna go down a little bit more but start to go sideways
or maybe it’ll just go sideways immediately or maybe best best of all is
when it starts to retrace and go back up and that’s normal again no guarantees it
could just keep going down and down and down the company could even the company
could go bankrupt or whatever so there no guarantees all right but let’s say it
goes down too far too fast and so you sell an option with a strike price down
here okay all right there you go and then now that’s a naked put you’re
selling a naked put and you know it could just keep going down and down and
down the price and then you’re losing more and more money there’s a limit to
what you can lose unlike with a naked call where there’s no limit but still
you can lose a lot of money if you just sell a naked foot so let’s say you make
it a spread where you also buy a put option with the price down here let’s
say okay great so now you’ve got a limited loss here all right and you know
what that limit is all right great okay so let’s say things work out well and
hey great okay it starts to the bleeding stops or slows down starts to retrace
great and now you know it’s over here and you could you could take off your
position and just take your profits or you can wait until expiration your
choice but let’s say oh it starts to go up but it goes up way too far way too
fast it’s just out of control right and you think wow it’s probably gonna now
either go sideways or go up a little more but not much or start to retrace
again and go downwards again there’s no
guarantees it could just keep going up and up and up and that’s why there’s
always risk when you sell options which you have to be aware of alright but now
you might want to leg into an iron condor again now you might want to sell
a call spread okay let’s say it’s right here and then for protection you could
buy it you know you sold a call but you don’t wanna make it a naked call
necessarily and so you now buy a call up here with the price up here to protect
yourself all right otherwise if you just sold this call
here then it would be a naked call uncovered call so let’s say you sell a
call here and then buy a call with a strike price above it and now you have a
defined risk and lo and behold your prediction was correct and it
starts to go sideways maybe even go down a little bit and hey you reached
expiration you win great okay so that’s how I’ll egg into an iron Condor again
it’s only gonna go up too far too fast or down too far too fast not both at the
same time and so usually I’m not going to sell both the call spread and the put
spread at the same time alright but if it goes down too far too fast and then
later on up too far too fast or vice versa up too far too fast and then down
later on too far too fast I might leg into an iron Condor there
and you could potentially double or almost double your profit potential that
way all right now of course you’re taking some risk there so do this really
carefully don’t do this unless you really know what you’re doing and you
always want to study the fundamentals of the underlying equity whether it’s a
stock or whatever or whether it’s oil or whatever it is okay if it’s a company if
you’re selling a put spread you want to make sure it’s a really good company
that’s not going bankrupt you want to make sure that you’re not in the middle
of a bear market or a recession something like that if it went up too
far too fast you want to make sure there’s a reason you believe that it’s
going to retrace or at least go sideways or go up but not much more
all right you always have a reason for every single trade you know why you’re
making the trade and with the call spreads and the put spreads you’re
defining your risk you’re limiting the loss that you can
take all right so that’s my explanation of how I do iron condors and I really
appreciate you watching and listening to my videos if you want to support my
channel sometimes I’ll put out sponsored videos where I’m promoting or helping
someone a company to promote in ICO or maybe a penny stock a small company
stock and so that’s that’s a sponsored video and if you just click on those and
give it a thumbs up leave a nice comment that will help
that’s it doesn’t cost you anything it cost you nothing to do that except a
little bit of time just to click on those videos and give it a thumbs up and
then you you’re supporting my channel and I really really appreciate that
alright another way to support me is to join my bit connect to team I’m going to
put that link in the description of this video for bit connect which is a way to
do earn daily interest I profit every day from bit connect so you can join my
team as well so thank you so much I really appreciate it and you can email
me anytime at David Modell at gmail.com thanks a lot and I’ll talk to you again
soon

6 thoughts on “Iron Condor Option Strategy: Trading Them the Right Way. // 101 income example explained”

  1. Hi David, thanks for the video.
    Could you please make a video on your strategy when it comes to news-based trading/news event trading/ trading the news??

  2. One suggestion is that 3 leg in and lagged then complete the iron Condor, so the stock move will make the credit collected wider then ur spread, so once condor is completed, it's hedged with 0 risk to expiration.

Leave a Reply

Your email address will not be published. Required fields are marked *