Iron Condor Adjustments Tutorial | Options Trading Concepts
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- Опубликовано: 6 июл 2024
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I now know why this video has 95k views. I’ve just watched it 4 times in a row and my brain feels fried.
Guys, I’ve been studying Tastytrade material since October and things started coming together for me just a cpl weeks ago.
I never commented or reached out before but after going through this video I just had to let you know how much I appreciate everything that you guys are doing!
Thank you !
Mike is awesomest
This information is pure gold. Thank you for the great presentation :)
Thank you! Glad you enjoyed it!
I've always found adjustments to iron condors to be confusing. Sometimes, I just close out the losing side, take a loss, and wait for the other side to expire worthless. But this is the best explanation of iron condor adjustments I've ever seen. Once an IC has gone against you, you know you're going to take a loss. The goal is to make it a small a loss as possible...
You can also make a calendar in the loosing side if the stock is moving in one direction drastically
@@dipankardutta602 Can you elaborate on that?
@@Eeshank2 you can roll that side only..
Sell or roll untested side. Close tested short. Ride tested long with trend.
Thanks for such great lessons :)
I’m a few years behind but Mike’s explantations are phenomenal!!!
Nice strategy discussion. Thanks.
Thank you so much.
This incredible video is 17 minutes long and taking me about a month to digest.
What happens if 20 days into it you do this play and then another 10 days goes by and the stock moves against you the other direction
It shouldn't be that hard... That means it's not being properly taught.
I had to rewind this bitch so many times LOL
@@Hotziggaty that is why to trade "daily" iron condors. I use the SPY. If you choose a 16 delta or 80% profit average you can lose three trades and still make money on the other two.
Mike, good stuff! 👍
Thank you, I will just stick to selling covered calls and cash secured puts
Thank you Mike! I just placed my first IC, having done well on selling net credit vertical put spreads. While I have nearly a month and a half to EXP I wanted to better edumacate myself on what to do if the price of the underlying creeps between or beyond a pair.
Thanks mike for putting out all these effort to tutor us. I learned alot from you
Very good! Thanks!
Excellent Mike.. thank you..
An excellent info for learner’s....👍👍...
Hi. Excellent video. One question I have. What can I do if the iron condor turns against the same expiration date?. Thanks
I like this style of learning.
Mike, I am writing from Brazil. Huge audience here. I was wondering if a 4th possible adjustment could be roll the entire position to the next month. I am managing a IC, and after 5 days the long call was bleached. I waited for more 5 days and then roll up the untested side. But, the stock is slowly increasing the price. I am planning to roll up the entire position for the next cycle.
Hmm I'm wondering, what about rolling over iron condors? Is that recommended?
Thanks.
Great video Mike
How about buying a call or a put on the tested side for the next expiration date when price approaching your BE. I think the delta on that call or put would be good and price decay would be lower. If Price retreats to safe and profitable zone we can square off that call or put otherwise it should balance the loss on the other side. Woiuld be grateful for your thoughts on this. Very curious and would not mind if you tell me I am totally wrong..
I think break even is wrong at 10:30
Shouldnt it be
80+1.30=81.30 on upside
75-1.30=73.70 on downside
Please clarify
What is the ideal pop for this kind of trade? In tastyworks the default short iron condor is always 24% for pop?
great vid
hi... I was looking at a condor of stock XXXX Oct 30 (sell the 400p x1 and buy the 300p x1, then sell the 500 cx2 and buy the 550c x2)
x2) for about $34 credit. Now what happens if XXXX slips to 380 or 520 before oct 30 - do one of my legs get exercised...and if so what do i do to manage the trade? thanks
Double down strategy. What about value of the lost time and ability to spend all this time on a better opportunities?!
Thank you. Does this make up for a wash sale? Trying to learn more
It may depend on the account/trade you're in - I would reach out to a tax professional for an answer to this question. Sorry I could not be more help!
2 questions- with example 2, iv goes up for the puts, but does it go up for the calls? I never see that happen. If stock price drops, iv for calls doesn’t rise much.
Also, if the short option is breached, depending on width of spread and what market looks like, wouldn’t it make sense to buy back the short option (or part of them if you have several) and let the position run toward the long option to realize a possible profit?
option premium overall rises, but if the stock price is dropping the same strike calls are now further OTM, so it may not have a negative effect on that side of the trade.
We don't leg out of a trade like this, because buying back the short option at a loss and holding the long (which we know is a low probability trade in itself) just gives us a huge cost basis to overcome, and there's nothing that guarantees the stock will continue trending in that direction. It could also multiply our risk compared to our initial trade, since spreads are very different compared to naked options, in both risk and monetary value.
Hi mike, when adjusting the untested side, wouldn’t there still be considerable premium left, depending on how fast the price moved towards the tested side?
Depending on how much time is left to expiration, the trade may not be that underwater at all. The most important thing to consider with time left to expiration is keeping the profit zone wide, since defined risk doesn't offer much management opportunity, but moving the untested side closer is a surefire way to reduce max loss, even though it reduces probability of getting out for a scratch or profit since you'd be narrowing the profit zone at the same time.
So I'm curious, if we start out with an iron condor and adjust it to the point that it is an ironfly, and the stock then ends up blowing out the ironfly by expiration, why don't we close out the side that's worthless and then just keep rolling out the other side? For example, if the stock shoots up, then we can just buy back to close the put credit spread for cheap and then just keep rolling out the call credit spread as if it was an ITM naked call, as long as we are getting a credit. This way we would just keep on pushing out the trade until we win. Thoughts? Am I the only one that does this?
If I were you I'd email Mike and ask him to check his whiteboard. If you're still confused you can crowdsource your question for the geniuses on the
r/thetagang subreddit. That subreddit has a near limitless collective wealth of knowledge and I can't recommend them enough
Hi Mike, I would like to ask why the strategy have been changed from Iron condor to iron fly when the market goes up, can I move my strike prices up but still using iron condor strategy? Thanks!
The reason we roll up the put spread is to ensure we route the roll for a credit, which reduces our max loss on the trade. If we have an iron condor and just move it, we could be paying a debit, which reduces our max profit and increases our risk.
I have a question about buying back the vertical that’s almost in the money you would lose half of your premium but you wouldn’t have to be bothered about making more trades? And the other question is Something that you mentioned in the video where if the underlying stock goes up the options will go up as well and apparently either day traders that are doing just that they’re buying way out of the money options and they’re waiting every hour to see if those options will go up and apparently making tremendous gains? So what do you think of that?
It's tough to be SUSTAINABLY profitable buying OTM calls, but totally up to you! Sure, if you have an iron condor you can exit if your assumption has changed, and the spread having time left to expiration will help prevent you from getting anywhere close to max loss if it's near the stock price. Totally up to you!
I confused the presentation bcoz the put side in the thinkorswim is in the right side(?)
Technically max loss is 500, because you could get exercises early and then the stock could flip and go the other way
Great video. Here is a question about if an iron condor broken far away upside, underlying jumped. IV rank fail. Is there any assignment risk if leave dont do anything? What need to do if there is an assignment risk. In this situation accept defined max loss.
Thank you
Thank you!
There is always assignment risk with ITM options, but I always look at the extrinsic value left in the short option. That is usually the determining factor, as anyone who exercises their option gives up extrinsic value. So if that option had very little extrinsic value left, I would say the assignment risk is much higher. However, if the long option from the iron condor is also ITM, it acts as protection and can be exercised to get rid of the position. If you were to leave the iron condor on through expiration, the short call would be assigned, but the long call would also be assigned if it is ITM and you'd be left with no position.
That was my question too, and very well answered. Thank you so much Mike for the precious info.
tastytrade What is considered high extrinsic value and low extrinsic value?
Great vids! If one of my legs got breahed and went ITM. how can i mitigate loss? Is butterfly an option?
Thank you! There are plenty of options available, but we try to collect a credit with whatever defense mechanism we choose - this reduces our max loss, and increases our profitability if we end up being correct.
At 16:31, Am I right in assuming you meant that if you inverted the short strikes that it's possible for them both to expire ITM, thus being prohibitively expensive to buy back?
If we invert the short options, at least one of them will definitely expire ITM, but if the stock price is between the strikes then both will expire ITM. This just means that we're creating a complicated situation where we have to subtract the intrinsic value from the total credit we received from the inverted roll, which is why we don't go further than an Iron Fly. An iron fly is the furthest we can roll while still keeping the possibility of the entire spread expiring worthless if the stock price is exactly on the short strike at expiration.
vertical spread options strayegy
tastytrade
I get it when the price moves down the IV goes up, so we move the call spread down a little bit to collect good amount of credit (0.3) while having a not to bad POP. But the last example, when you mention the price goes even further down, the IV should be higher, and moving the call spread should collect more credit, but then you said it's only 0.1, that makes me confuse.
The moneyness matters..in the first case the price is between the initial legs ..
just incase your still confused, The reason why it's only 0.1 credit is because those calls are so OTM that they become so cheap. But your right about collecting more credit when IV is up (this is where I think you got confused) , lets say that those calls are still the same distance from the stock price but the IV is down as well. Then you would probably get like 0.0001 credit lol.
remember this, prices get cheaper and cheaper the further they are OTM because they are less likely of being worth anything.
Hope I explained it well.
i sell iron condor 5 dte on liquid indexes. dont know why everyone says 30-45 days
Just set the non defeated call or put on the other side to half of the defeating side premium Everytime . U will always be in profit. Don't disturb the buy ones legs both sides.
Hello I watch a lotta different peoples explaining this strategy, they never tell you that you must first own 100 shares first and must have enough collateral of cash and what happens if your assigned, please start off explaining this thank you
So basically if the price stays in between the strike price we don't have to buy to close and let the option expire to keep the premium correct? Or are we supposed to buy to close before expiration?
We buy to close prior to expiration to avoid gap up/down movement after the option market closes - options can still be assigned / move ITM based on after-hours stock trading.
@@tastyliveshow Just an FYI here... I checked with Fidelity and they tell me that an option holder can execute on a contract after hours by calling in to the broker and asking for this to be done. However, once the market closes at 1pm, option prices are settled at the price at which they closed during normal hours, not extended trading or after hours. So if a stock price moves in the money after hours into an area where it normally would be at risk of assignment, and closes in the money, it should not be assigned. I've not encountered this actual situation, but this is what I was told by my Fidelity representative.
Can we roll the position to next month making it delta neutral?
I have the same question.
Mike, your use of the Horizontal layout of the Iron Condor on the whiteboard was OK at the start of your presentation. As you moved forward in showing the adjustments, you should have then started to use a Vertical diagram that shows the real "Up & Down" movements of the underline stock. The Vertical position is what we see on the stock chart, so why not show it that way in your presentation.
Thanks for your feedback - I will keep that in mind!
Can I adjust my call and put option trade as the market moves up and down?
Ricky,
You certainly can! There is nothing that forces you to keep the option you have - you can close it at any time and open a new one at any time.
On The first example wouldn't max loss be $250? On both sides you're collecting 50 credit each so 100 max profit. So If the stock price goes up to 89 you lose the call side for 300 but you win the put side for 50. So max loss is 250.
It would not - only one side can be a loser, and the total credit is applied to offset losses, so if you collect $1.00 in total and both spreads are $3 wide, max loss is $3 - $1 = $2
Isn't it also called "iron butterfly" what he describes at around 07:00 min? Great video BTW, and the channel in general! Thanks
Yep! when the short strikes are the same, this is an iron fly.
An Iron Fly is basically an Iron 'fly.. 'fly is the short form of butterfly. ;D Not to be confused with a house fly or horsefly! Those are nasty. xD
I understand the theory of rolling and moving the iron condor but while you are reducing max loss you are also increasing the property of that loss by quite a lot because the strikes are a lot closer. I also don't understand the logic. You roll the trading in the direction that your original trade didn't plan to happen (so you are in a compromised position) Only to increase the probability of taking the total loss even tho it might be a little bit smaller.
Why not just take the loss because your original position and idea failed. Then open a new position that you actually like and think is favorable? This new position will most properly have a better win/loss ratio and you can cover your bad iron condor this way. What am I not understanding?
your logic here is very sound. A big problem with rolling net credit trades is that you're basically accepting loss so you can scalp a few extra bucks. Something I heard is that when you take a defined risk trade, expect to lose the max risk. Don't try and beat a dead horse. Also if you don't roll your trade there's still a good chance that it can be back in the money if the dte is long enough. So I wouldn't jump to roll trades, rather I would personally prefer to let them play out and be prepared to lose the max risk.
Video starts at 4:50.
Not really practical suggestions. if the trade is in a loss state - it means the stock is actually directional. Makes most sense to get rid of losing spread. Then double up on the winning spread as the stock continues in that direction.
What’s that DTE ?
DTE = days to expiration
This dude's hair is french. If you know what I mean....
I'm not that new to options, but I've got two questions for you sir. When you Sell a Call(you have to own 100 shares of x stock), and when you Sell a Put( you must put up collateral). Why don't you explain that in this video? I would really like an explanation sir.....Thank you very much for your time and experience.
Thank you, I been watching a lot of different people explaining this strategy, 90% of them never. Start by saying that you need to own the shares first and you must have collateral, and never explain what if you get assigned
@@martinkrins3915 as long as you close the position before the close expiration you won’t get assigned. Robinhood sets up reminders so this doesn’t happen.
Can you roll the call spread down to lower strikes in robin hood? RH hasn't given me a clear answer. If not should you buy a put to hedge yourself if your put spread gets blown out?
(Try breathing out of your nose for your next videos please)
go inverted and hope it doesn't come back. cross your fingers
certainly an aggressive approach that could work - my only issue with it is that it basically doubles the risk less the credit received.
If the stock price comes between the inversion, I now have two ITM spreads that are at max loss, instead of just one.
how baked is this guy
As baked as his forehead is large my friend.
He does have a large forehead doesn't he . Big brains !
Rolling ia bullshit. Change my mind.
Wrong. Never forget: Once a job is fouled up, anything done to improve it only makes it worse (Finagle's Fourth law of dynamic negatives)
Really bad RR ratio!!!