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Home Finance Personal Finance Iron Condor, The Day Traders Advanced Technique
Iron Condor, The Day Traders Advanced Technique PDF Print E-mail
Written by Walter Fox   
Monday, 22 December 2008 11:15
Iron Condor in the trading business is a stock option with two vertical spreads. The Bull Put Spread and Bear Call spread are not kung fu techniques, they are spreads that have the same expiration date. The Iron Condor is a commonly used strategy that puts the Bull and Bear spreads as the same as a call spread.
by WalterFox


Iron Condor in the trading business is a stock option with two vertical spreads. The Bull Put Spread and Bear Call spread are not kung fu techniques, they are spreads that have the same expiration date. The Iron Condor is a commonly used strategy that puts the Bull and Bear spreads as the same as a call spread.

If you are an expert in day trading, you will be familiar with these terms. A newcomer, you will need to learn and master these techniques to help you become successful. The Iron Condor term resembles a condor, with tis wide wing span. Inner options are like the condors body and the outer body resembles the wing span.

Positioning of the spread is where the origin of Iron orginated. Spot pricing is placed abroad the underlying item. The item consist of a spread that is vertical and below the above spread. Many strategies adopt this technique, but because the strategies are a bit different is what defines the Iron Condor strategy.

The short and long Iron Condor are two variations in options trading that are demonstrated below. Short Iron's approach are buying long options for the inner body. The strikes are called out of the money strikes. While buying long options, the trader is able to sell options for the outer wing as well.

The long Iron Condor approach varies slightly from the short Iron Condor technique. In this strategy to learn to day trade, the trader will buy long options contracts from the outer (wings) strikes. The trader then sells the options contracts for the inner (body) strikes. These strikes are out-of-the-money puts and calls, as observed in the short Iron Condor technique.

The Iron Condor approach has many advantages. One of the most important advantages is that the Iron Condor has the same initial and maintenance margin requirements as the requirements for a single vertical spread. This results in a potential profit from two net credit premiums.

Further transactions can be avoided by allowing the contracts to expire. Positioning the spot price in this fashion allows the underlying line to be between the inner strikes near the tail of the body (The inner body stike), or open contract.

As evident from the great advantages given by using the Iron Condor technique, this trading strategy is commonly used in option trading and taught to students attempting to learn to day trade. While only slightly different from other acondora-type trading techniques, the Iron Condor is significantly more advantageous in advanced situations where the buyer desires multiple options in situations when the trader needs to know how to trade options.

About the Author:

TheScienceOfTrading.com provides 90 free minutes of videos on option trading systems and provides a complete and detailed stock trading education for beginners to experts.

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