Iron Condor – The Comfort Zone (8 of 8)
San Jose Options presents Iron Condors - The Comfort Zone
The Iron Condor is a very popular options strategy today. It's known for it's high probability, but everyone knows that the risk to reward on this trade is highly unfavorable.
One thing that is not pointed out is that although this trade appears to have a high probability, included in this is extreme risk and high stress.
When we look at the "Comfort Zone" and safety range, we see that this only covers about 35% to 40% of the probability range.
We also take a look at Butterfly Spreads and Calendars. All three of these popular income strategies share a similar "Comfort Zone."
Although the Traditional Iron Condor appears to be a high probability trade with low risk, we believe it's not the trade it appears to be. In today's fast-paced market, it's a very risky trade that exposes your portfolio to great risk.
It only takes a few minutes out of your day to do something that can potentially change your life forever. SIGN UP for a FREE live demonstration of our options education course at http://www.sjoptions.com.
San Jose Options is the preferred options education course for risk averse investors. Our strategies focus on low risk, high probability trading that allow you to have an enjoyable lifestyle without the stress.
Stop doing condors. It doesn’t make sense anymore... percent is included in the 83%, that’s what they talked about. They don’t talk about this. I mean, look, if the comfort zone is kind of in here, we’re kind of comfortable. That means, we have a 30% chance this way being uncomfortable as well as a 30% chance this way being uncomfortable and about a 30% chance in the middle to be comfortable. You have just as equal of a chance to be uncomfortable on this trade as you do comfortable. It’s almost like a 50-50. It’s not near an 80% probability trade. Not when you consider the emotions and the risks that are involved with it.
This is a true story. This person is down 75% in 3 months doing the strategy and not knowing so much about Greeks and just trying to do things like it goes over here. So what does he do? he made money on this side so he cashes it out. Now, he’s left with this spread over here, a vertical, a bull-put spread. Now, he’s hoping the market goes back this way, then it becomes very directional. Than if it goes this way, he loses more, technically. Or he might come over here and buy some puts. When he does that, it lowers the graph here and then we can’t make anything. Then it goes back this way and then he loses again or let’s say it goes this direction and then he takes off this side and then turns into this bear call spread and that goes against him and so on. He just goes back and forth, back and forth and trying to manage this position with all the popular adjustments that are out there. He’ll even try to morph some sides into calendars and just being creative and he bought some of his short strikes and now he’s holding on to long puts and all kinds of things. That’s what happens.
What’s happening is people out there are trying to figure out the best adjustment so they keep going like course to course and every course teaches the same strategy and then everyone kind of has a different variation on their adjustment. But I’m here to tell you what you can’t see. I’m here to tell you what’s really going on and it’s just not the greatest trade for today. We really need to redesign this now that we have software. These trades were created before they had software, when they didn’t know what it looked like.
When I was with in my first course, they taught me this type of thing and I didn’t know what it looked like. I didn’t know what a credit spread looked like because when I was running options in the past, they didn’t have software. Once these new companies came out with these amazing software, that’s when things begin to change because I was able to see what I was doing and then it scared me. I was like, “Wow, I was doing that?” Then I found other ways to trade, thanks to the graphs, not ‘cause I’m a genius but because I’m visual and I was able to just move things around and things like that.
Anyway, I hoped you like that story and unfortunately, you really have to go through these losses and these struggles and all and trying to adjust this trades to really appreciate a different style, a different comfort zone. Once you do trade these and you feel what it’s like to be in the 35% comfort zone, you’ll really appreciate an 85% comfort zone because it’s so different. It doesn’t control your life.
Well, I hope you guys are understanding and just have a great day. If you have any questions, you know how to reach us and I hope you learned a couple more things about the iron condor. Have a great day!