Iron Condors

Iron Condors are an options trading strategy that is neutral and brings limited risk and limited rewards.

The investor finds a stock that's been marking time, or showing little movement. You are going to make more money in this options trading strategy if the stock stays close to the point you bought it.

Say you're watching a stock that consistently trades around $73. In this case, you would sell one $75 call at $6 and purchase one $80 call at $4, then sell a $70 put for $4, and buy a $65 put for $2. Based on one contract, you would bring in a credit of $1,000 for the two options you sold, and pay out $600 for the two options you purchased. That would leave a $400 credit.

For this options trading strategy, you will reap the largest profits if the stock stays between $70 and $75. Between $70, the $75 the options would all expire worthless and you get to keep the $400 credit received. If the stock falls below $70 or climbs above $75, you may absorb the maximum loss of $100. The maximum loss is calculated by taking the strike price of option you sold that is now in the money, and subtracting the strike price of the like option that you purchased and then subtracting the credit received. In the above example, if the 70 put ended up in the money, you would take the $70 strike minus the $65 strike minus the $400 you received for a maximum loss of $100.

Iron Condors is one of many option trading strategies taught by Better Trades.

There are many options trading strategies available to BetterTrades students. Under the system developed by Freddie Rick there are strategies that can work under various market conditions. There are covered calls and bull put spreads for bullish market; iron condors and calendar spreads for a neutral market; and bear put spreads and bear call spreads for bearish markets. At BetterTrades, you can find a wealth of strategies that can fit your trading needs.

Bear Call Spreads | Bear Put Spreads | Calendar Spreads | Covered Calls | Iron Condors