Let's go over the pros and cons of the iron condor as it is becoming a popular option trading strategy. Even though this trade might appear as a very simple one to put on and manage, one should take the time to learn the ins and outs of this trading strategy before putting real money on the line.
The iron condor is simply 2 individual credit spreads on the same underlying - a put vertical spread and a call vertical spread. It is really this simple of a strategy, even though the name of it might be misleading.
The simplicity of this trade might be a bit misleading to the newer option trader due to the fact that the probability of the trade is so far skewed in the favor of the trader - it is easy to overlook the potential risks that are involved.
One of these risks has to do with the risk to reward of the trade. Risk to reward ratios on these types of trades are just plain awful - with the amount of dollars that is potentially at risk is far greater than what can be made from the trade. Let's look at an example - we put on an iron condor where our potential max gain is five thousand dollars. With this trade, it is entirely possible that our maximum possible loss could be around $25,000 - or more.
And while the above example may really open the eyes of newer iron condor traders to the real risks that is involved with this trade - it is IMPORTANT to understand that while the risk might be there - with the proper training, tools, and use of risk management techniques and adjustment methods - this risk doesn't necessarily need to be such a frightening issue as it can be very much controlled.
The final, bottom line is that as long as the trader has educated themselves on this trade and they have learned how to correctly manage and adjust the Adjusting Iron Condors when things go awry - this trade can be a wonderfully reliable way to create monthly income from the market.
The iron condor is simply 2 individual credit spreads on the same underlying - a put vertical spread and a call vertical spread. It is really this simple of a strategy, even though the name of it might be misleading.
The simplicity of this trade might be a bit misleading to the newer option trader due to the fact that the probability of the trade is so far skewed in the favor of the trader - it is easy to overlook the potential risks that are involved.
One of these risks has to do with the risk to reward of the trade. Risk to reward ratios on these types of trades are just plain awful - with the amount of dollars that is potentially at risk is far greater than what can be made from the trade. Let's look at an example - we put on an iron condor where our potential max gain is five thousand dollars. With this trade, it is entirely possible that our maximum possible loss could be around $25,000 - or more.
And while the above example may really open the eyes of newer iron condor traders to the real risks that is involved with this trade - it is IMPORTANT to understand that while the risk might be there - with the proper training, tools, and use of risk management techniques and adjustment methods - this risk doesn't necessarily need to be such a frightening issue as it can be very much controlled.
The final, bottom line is that as long as the trader has educated themselves on this trade and they have learned how to correctly manage and adjust the Adjusting Iron Condors when things go awry - this trade can be a wonderfully reliable way to create monthly income from the market.
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To be taught how to suitably trade the iron condor Option strategy for passive monthly earnings, go to this Iron Condor site and observe our Free Video and read our Free Report.
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