Iron Condor Adjustment

Iron Condor Adjustment

In this excerpt from our options mentoring course, Morris gives us some insight on adjusting the Call side of the Iron Condor.
Morris is the founder of San Jose Options.

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Iron Condor Adjustment with SJ Options

Video Transcript

Hypothetically, let’s say we’re over here. We do that adjustment and now, notice our vega position just dropped in a way it rose but it was -60 something and now it’s -40 something.

You notice as you go this way and you buy those debit spreads or take off the credits that it’s actually helping your delta position over here making it a little bit more flat but it’s, at the same time, it’s also taking away your vega hedge. It’s something to be aware of. The more that you kind of chop that down, you chop this down or you take it off, you’re sort of hurting your volatility hedge on the call side but you’re helping the delta. But that’s a very common adjustment and in this class, it’s as far as we’re going to get. I’ll just tell you there’s—I’m giving you insights so you could experiment on your own and try to figure out better ways.

The pros to that is it’s definitely helping your delta. You’re getting this flatter, we’re talking like if we move over here we’re starting to get out of our comfort zone. We’re getting a little bit better delta position. We still may have a little bit of credit here at the top but we’re giving some back and at the same time it’s hurting your vega position a little bit because, as I already told you, the RVX is going to drop about 80% of the time. The trade really benefits to have that negative vega over there but you’re starting to actually lose some of that hedge. It helps the delta but it hurts the vega.