Chicken Iron Condor Strategy Tutorial | Options Trading Concepts
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- Опубликовано: 3 июл 2024
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Nice Job Mike, I always like your videos, short, direct and you summarize the take aways! Thanks!
The Iron Chicken!!🔥🔥
Yeah. That is exactly what I was thinking. We can just call it an iron chicken.
There is some great information in here and I would understand it a lot better with more illustrations. Would love to see more use of the whiteboard to illustrate your point! Thanks!
‘Chicken’ implies fear of losing. It should instead be called ‘poor man’s iron condor’ because all it does is accommodate a trader with less capital (smaller investment required PER TRADE). To me, a real ‘chicken iron condor’ definition would have higher probability of profit (but less ROI), being less of a gamble and more of a safe play. My definition of a chicken iron condor would make more sense for trading earnings (as earnings lead to big swings so you would need to widen strikes).
Wouldn't the normal iron condor be for chickens?
Short straddle should be called ironballs...
Hey Mike, I meet you at the CTE 2018. Thanks for your insight and expertise. Keep it up and keep teaching us..
Great to meet you! Thanks, I will! Thanks for your support
Very intersting, thanks a lot. But I'm sorry I couldn't get your point at about 7:00 vhen you compare risk and return.
Thanks!
Very nice explanation. TAN Q SIR.
Mike you may want to mention per the Other Iron Condor Video that now its best to trade these with an Implied volatility over %50 per the study Tasty Trade did before.
That will definitely make the strategy more ideal, and help us stay further from the stock price while still collecting 40-50% of the width, but it's not necessary to see success with the strategy.
I’ve been watching you guys for a long time and you put out very good content, I’m just wondering at 2:09 you said 1/3 width but 70% chance of profit. That means you would be pretty close to break
Great info! At the moment with the high volatility I'd prefer lower deltas and otm strikes since premiums are higher ... but, as initially said, great strategy and thanks
Should we be exiting at 25% profit, like you have mentioned in other tasty videos re: "when to close a condor"? Or is the expectation that we (A) go to expiration or (B) close right before expiration?
thanks
Nice 👍🏻
I don't have much experience with options trading, but I have found your videos to be extremely helpful. Intuitively, it would seem like this Chicken Iron Condor strategy would be a good choice for large, blue-chip companies with low volatility. Am I correct, or am I missing something?
Zak,
Thanks for watching! The strategy does set up better with higher priced underlyings - it helps us get that 40-50% width collection much more easily. Higher IV will help us get that as well, compared to low IV. With low IV, the premium is wrapped VERY closely around the ATM strikes, where with higher IV the premium is spread much further out.
@@tastyliveshow
What does "...40-50% of the width collection " mean?
I kind of lost you in the middle, that's cos' for explaining Chicken Iron Condor, we need the use of more illustrations and pointing to the board with a laser pointer or ruler. That will make it more easier for beginners like me to follow. Thank you. I am sure others benefitted, but not me :( Good information, but it sounded difficult as I am graduating from the plain Calls and puts to spreads, verticals, straddles and strangles.
Thank you for your feedback!
This is basically a regular iron condor strategy that I am selling, except the strikes are much closer to the stock price so that I can collect 40-50% of the width. It is similar to selling a vertical spread near the stock price, rather than selling it further from the stock price. The probability of success is lower, but the monetary potential is higher.
I’m really really a beginner I was lost too.
I am confused about the overall strategy. Please correct me if I am hearing you wrong. The ideal set-up for check IC
1. Narrow the short strikes to collect more premium. Ideally about 45% of the width of the short strikes
2. Narrow the width of the spreads ( put or call ) to about 2-5 points - also to collect more premium
3. The chicken IC gives a lower POP but higher P/L in high IV environments ( greater than 50 )
4. Increase lot size if the IVR is greater than 80 ( from a different video )
Thanks for your time. Your videos are great!!
In a chicken iron condor we:
1) Bring the spreads closer to collect 40-50% of the width
2) Not necessarily - the more narrow the spread, the less we can expect to make overnight. We go as wide as we're comfortable with, while still collecting 40-50% width
3) Lower POP because the spread has a tight profit range, but on a big earnings blowout, we'll lose less than a regular iron condor or naked position. You really need a non-move for this strategy to work well.
tastytrade please correct me but if you were able to collect over 50% of the strikes (say 255 credit 5$ wide condor) even if one of the wings go to max loss, would you still collect the 5$ over 50% since both spreads cant be in the money at expiration? Even if one gets blown to max loss doesnt collecting over 50% credit make it a win of atleast 5$ on expiration? 255 credit - 250 max loss on one wing while the other expires worthless = net gain of 5$
What does “1/3 width of the strikes” mean in actual numbers? Which strikes are you referring to? Could you illustrate that?
This just refers to the collection we're looking for on spreads. If I sell a 100 put and buy a 90 put to define my risk, I have a 10 point wide spread. Ideally, I collect 1/3rd the width of that spread, which is $3.33.
@@tastyliveshow Is that 1/3 on each side (2/3 in total) or 1/3 on both sides?
interesting
Are there any books on options that you would recommend? New guy trying to get into this. Thank you!
Here is a book that one of our rising stars wrote! This is all about the tastytrade methodology:
www.amazon.com/learned-Trade-like-Sosnoff-Battista/dp/0615857752/ref=sr_1_1?ie=UTF8&qid=1527016938&sr=8-1&keywords=how+i+learned+to+trade+like+tom+sosnoff+and+tony+battista
Doesn't narrowing the width of the strikes make the trade more susceptible to going outside the expected move?
Yes it does - that's why this is more of an earnings trade than a regular longer term trade - we're looking for a quick profit and exit on an earnings move that is less than the expected move.
The best way to get more money is to buy more contracts with the reg condor there for you keep your POP and increase your return!
Problem with that is you would be increasing your position size which increases your risk...
That's doubling down on risk as well.
If you buy more size (=increases risk) wouldn’t you also balance that by moving farther out (= decreases risk) from atm?
which delta should have the short strike? 0.25-0.225 each?
This strategy is more about collecting 40-50% width, but it usually lands around the 20-30 delta range.
How many DTE are you using on these trades, both for earnings and non-earnings?
I like to use 45 DTE or whatever monthly cycle offers me a decent credit & time for earnings and non-earnings trades. Even cycles with some time will contract from earnings, and if I'm wrong, I have a lot more time to eventually be right.
Great white board
How soon would you use the chicken condor with earnings? Would you use the chicken condor a day before earnings?
Generally we sell them before the announcement, usually an hour or so before the close so that we can center it the way we want to.
Hm.. Lowering your max loss by collectief more premium, I get that, but I don’t get why this would be better suited as an earnings play?
I like it as an earnings play because sometimes if a stock exceeds its expected move it can be 2-3-4x expected move or more. Essentially the trade would be blown out so collecting more on something like this compared to collecting less on a regular iron condor would save some losses in those blowout occasions.
Then why don't you use a wider iron condor to minimize the risk as opposed to using chicken iron condor and risk getting it going ITM. From recent earnings plays, I would have lost a lot of money if I were to use chicken iron condor because of the massive upswing and downswing during earnings. I'm actually profiting from using wider condor after earning and collecting more premium after IV crush the next day.
@@Mr_OEM_Toys in the next opening after earnings the volatility drops
If he is wrong the wider standard condor will probably lose anyway because of huge swings so during earnings reduce the risk by collecting more premium and also gain more profit if he is right.
Can someone tell me what delta he is using for these CIC?
Since CIC's are more about the collection of 40-50%, the delta used will vary. With that said, we try and stay outside or at the expected move, which is around the 16 delta short options.
I'm lost again....why would you trade this at earnings.?..i thought you were profiting off of time decay, i thought this was a neutral strat. Any clarification would be greatly appreciated
This trade does benefit from time decay, and a contraction in IV, but the collection is much higher than a regular iron condor because the strikes are closer to the stock price. SO in the event of a 4-5x expected move earnings announcement, the net loss would be lower than a regular iron condor, assuming both trades are ITM, because the collection is higher here. The tradeoff is that this trade has a higher percentage of any loss given a big move since the strikes are closer than a regular iron condor. Just a tradeoff, but this strategy protects more from a massive move at the end of the day.
Totally up to you, but I hope this helps!
So... blowout earnings screws you either way, but less with the chicken spread. Usually a blowout will pull back some the next trading session, so why not do a IC butterfly based on the same logic?
There is also a teenager iron condor, he does work sometimes too :)
What are the strikes interms of delta
Typically around 35-40 delta. The strikes are closer because we're trying to get 40-50% the width, so it's within 1 standard deviation usually.
@@tastyliveshow Thanks alot. long strikes would be?!
couldn't you also just go further out on the long positions and get the bigger credit that way instead of decreasing your PoP?
Certainly could - there are a lot of ways to approach iron condors - just depends on your risk tolerance and account size really.
So the most extreme chicken iron condor is iron butterfly?
Technically speaking that is true, although with iron flies we wouldn't want to collect 80-90% of the width of the spreads, as that would indicate a very low probability of success even though our risk is very low. We still shoot for around 40-50% collection, which means our risk is likely more than a standard chicken iron condor.
I feel like this should be called the Rubber Chicken
Most earnings trades are exp move or more be careful you are locking in vol crush which is very hard with mis priced earnings traded. I avoid these.
Robot chicken!
Winner Winner Chicken Dinner
You’d be more profitable buying chicken iron condors through earnings than you would be selling them.
Earnings are far too much of a binary event to sell closer to the money strikes.
“70% of the time, implied volatility is overstated” means 30% of the time it’s actually understated, like around earnings.
Capturing the volatility crunch only works if you can capture the move within the strike selection.
this is truly WSB material, I guess it's just an example not to take advice from a broker. If the probability is 50% of profit with this thing, why would I pay a broker a commission for both spreads if I can just flip a coin, and pick either put or call spread instead of using a chicken condor. Chicken condor is basically paying a broker because I'm too lazy to grab a coin.
Not really.. with iron / chicken condors you can earn more premium than just a one sided spread. It really is a win win here because on Iron condors you can only lose on one side (either the put side or the call side). Which means selling an iron condor you are basically getting free premium on the untested side, provided it just doesnt go up/down TOO much.
Chicken
Huh? I am still confused. I am yet to find some that can explain this clearly.
we're happy to help - what is your hangup? Feel free to shoot an email to support@tastytrade.com too!
These names are out of hand lol
Don't watch this unless you have a basic understanding of options
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