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#Iron condor example how to

This means that the profit on this trade was not about $50 (which was my profit target). The following screenshot shows the entry and the exit price:Īs you hopefully can see, I put on the trade for a credit of $0.81 and closed it for a debit of $0.46. Instead of being patient and waiting for the iron condor to reach my profit target, I actually took it off before that. But that’s actually not how I closed this trade. You might think that this likely wasn’t very special as my GTC order simply got filled.

Now I want to walk you through my thought process when taking off this position which was 24 days after I put it on. This means that during the choppy price action, my iron condor profited nicely from the time decay and the decreasing implied volatility. It simply consolidated and chopped around a little (which can be expected after its prior bearish price action). As you can see, EWZ’s price got nowhere even close to the breakeven-points during the lifetime of this trade. The two black lines at 27.38 and 36.71 are the approximate breakeven-points. The entry and exit are marked with circles. Here is an image of how the trade looked like in terms of EWZ’s price development: That is why I put on a GTC (Good-Til-Cancel) order at my profit target right after the iron condor was filled. My goal was to close this position at 50-60% of max profit which would be $40-$50. In my opinion, that is a very good position, especially considering the size of this account. In case it is hard to recognize on the above screenshot, here is a list of all the important metrics:Īs you can see, the final iron condor was very delta-neutral, had a good probability of profit, an even better probability of reaching 50% of max profit and generated over $1 in time decay every day. This is how my position looked when I submitted the order: I felt that choosing these options gave me the best risk/reward ratio and the best probability of profit… After comparing a few different strike prices, I chose the following options: But my slightly bullish hunch did barely impact my strike selection. My directional assumption was neutral to slightly bullish. The October 19 expiration date had 49 days left until expiration, so that is why I chose that expiration date.Īs for the strike prices, I wanted to create a neutral iron condor (so with a delta near 0). For short iron condors, I usually go for 40-50 days until expiration.

I had to choose an expiration date, the strike price for the four legs, an order price, and a trade plan.

It had a quite beaten down chart and I thought that it might have some range bound/consolidation price action over the next few days to weeksĪfter choosing EWZ (iShares MSCI Brazil ETF) as an underlying asset, it was time to find the best setup for my short iron condor.

Lower priced (better for a small account).

Here are a few reasons why I chose EWZ over some of the other tickers on the list: EWZ had an IV Rank of about 75 which is relatively high. But as generally implied volatility was relatively low during that time, this list wasn’t very long.Īfter a peek at the options and the chart, I filtered out most of the tickers on the list quite fast and ended up with EWZ. To find assets that meet all of the just mentioned requirements, I simply went to the watchlist tab inside of the broker platform tastyworks and applied the filter that excluded stocks with upcoming earnings and the assets that had an IV Rank of under 50.īy doing this, I had a list of tickers that all were potential candidates for my trade.

No major upcoming events such as earnings.

For that all of the following criteria have to be met: I wanted to do a short implied volatility trade. Now let me start by presenting what went into the trade before I put it on. That does not necessarily mean that this is a trade that is good for you and your preferences. (But that wouldn’t make a lot of sense in this small account.)įurthermore, it is important to understand that this is a trade that I like. By risking more, I could have easily increased the profit 10× or even more. Instead, I want to focus on the process and the setup. That’s because I am not trying to highlight the money that I made. First of all, the trade was done in a very small account (ca. In this article, I will walk you through a short iron condor trade that I did recently. I hope this will give you some insight into what a good iron condor trade setup might look like.īefore I start, I just want to give you a short disclaimer though. They really allow you to see the trading process of someone else.

#Iron condor example how to

Live trade examples are one of the best ways to learn how to trade.