Iron Condor Strategy Explained - Full Example on $SPY ETF
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3 سال پیش
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★ Credit Spreads Explained - Passive Income from Trading Options
Credit Spreads Explained - Passive In...
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Debit Spreads Explained - Bull Call S...
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What Is an Iron Condor?
An iron condor is an options strategy consisting of two puts (one long and one short) and two calls (one long and one short), and four strike prices, all with the same expiration date. The iron condor earns the maximum profit when the underlying asset closes between the middle strike prices at expiration. In other words, the goal is to profit from low volatility in the underlying asset.
The iron condor has a similar payoff as a regular condor spread, but uses both calls and puts instead of only calls or only puts. Both the condor and the iron condor are extensions of the butterfly spread and iron butterfly, respectively.
Understanding the Iron Condor
The iron condor strategy has limited upside and downside risk because the high and low strike options, the wings, protect against significant moves in either direction. Because of this limited risk, its profit potential is also limited.
For this strategy, the trader ideally would like all of the options to expire worthlessly, which is only possible if the underlying asset closes between the middle two strike prices at expiration. There will likely be a fee to close the trade if it is successful. If it is not successful, the loss is still limited.
The options that are further OTM, called the wings, are both long positions. Because both of these options are further OTM, their premiums are lower than the two written options, so there is a net credit to the account when placing the trade.
By selecting different strike prices, it is possible to make the strategy lean bullish or bearish. For example, if both the middle strike prices are above the current price of the underlying asset, the trader hopes for a small rise in its price by expiration. In any case, the trade still carries a limited reward and limited risk.
Iron Condor Profits and Losses
The maximum profit for an iron condor is the amount of premium, or credit, received for creating the four-leg options position.
The maximum loss is also capped. The maximum loss is the difference between the long call and short call strikes, or the long put and short put strikes. Reduce the loss by the net credits received, but then add commissions to get the total loss for the trade.
The maximum loss occurs if the price moves above the long call strike, which is higher than the sold call strike, or below the long put strike, which is lower than the sold put strike.
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#IronCondor #TradingOptions #SPYStock
================
DISCLAIMER:
This video is for entertainment purposes only. I am not a legal or financial expert or have any authority to give legal or financial advice. While all the information in this video is believed to be accurate at the time of its recording, realize this channel and its author makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in this video.
ADVERTISER DISCLOSURE:
Jake is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to www.amazon.com. Additionally, other referral links are included and this channel does receive compensation for sending traffic to partner sites. Shopping through our links is an easy way to support the channel and we appreciate and are super grateful for your support!
How to Trade Options
Become a channel member to get access to great perks: 🌟 🎓 👑 @jakebroe
💯 LET’S CONNECT 💯
📷 Instagram @JakeBroe 👉 Instagram: jakebroe
🐦 Twitter @Broe_Jake 👉 Twitter: broe_jake
👇 👇 Watch My Other Videos Here 👇 👇
★ Credit Spreads Explained - Passive Income from Trading Options
Credit Spreads Explained - Passive In...
★ Debit Spreads Explained - Bull Call Spread / Bear Put Spread
Debit Spreads Explained - Bull Call S...
★ Credit Spread Examples on $TSLA and $JPM
Credit Spread Examples on $TSLA and $JPM
★ Debit Spread Examples on $NKE and $SBUX
Debit Spread Examples on $NKE and $SBUX
📷 📷 My YouTube Equipment 📷 📷
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================
📚 📚 Books That Changed My Life 📚 📚
📗 How to Win Friends & Influence People 👉 https://amzn.to/2F3ahGC
📕 Dumbing Us Down 👉 https://amzn.to/2spodrZ
📘 Quiet - The Power of Introverts 👉 https://amzn.to/36b2ti3
📙 The Red Queen 👉 https://amzn.to/2QzNW8W
📔 Rich Dad Poor Dad 👉 https://amzn.to/3bliFyP
📒 Why Nations Fail 👉 https://amzn.to/3fWZ3Em
================
What Is an Iron Condor?
An iron condor is an options strategy consisting of two puts (one long and one short) and two calls (one long and one short), and four strike prices, all with the same expiration date. The iron condor earns the maximum profit when the underlying asset closes between the middle strike prices at expiration. In other words, the goal is to profit from low volatility in the underlying asset.
The iron condor has a similar payoff as a regular condor spread, but uses both calls and puts instead of only calls or only puts. Both the condor and the iron condor are extensions of the butterfly spread and iron butterfly, respectively.
Understanding the Iron Condor
The iron condor strategy has limited upside and downside risk because the high and low strike options, the wings, protect against significant moves in either direction. Because of this limited risk, its profit potential is also limited.
For this strategy, the trader ideally would like all of the options to expire worthlessly, which is only possible if the underlying asset closes between the middle two strike prices at expiration. There will likely be a fee to close the trade if it is successful. If it is not successful, the loss is still limited.
The options that are further OTM, called the wings, are both long positions. Because both of these options are further OTM, their premiums are lower than the two written options, so there is a net credit to the account when placing the trade.
By selecting different strike prices, it is possible to make the strategy lean bullish or bearish. For example, if both the middle strike prices are above the current price of the underlying asset, the trader hopes for a small rise in its price by expiration. In any case, the trade still carries a limited reward and limited risk.
Iron Condor Profits and Losses
The maximum profit for an iron condor is the amount of premium, or credit, received for creating the four-leg options position.
The maximum loss is also capped. The maximum loss is the difference between the long call and short call strikes, or the long put and short put strikes. Reduce the loss by the net credits received, but then add commissions to get the total loss for the trade.
The maximum loss occurs if the price moves above the long call strike, which is higher than the sold call strike, or below the long put strike, which is lower than the sold put strike.
================
#IronCondor #TradingOptions #SPYStock
================
DISCLAIMER:
This video is for entertainment purposes only. I am not a legal or financial expert or have any authority to give legal or financial advice. While all the information in this video is believed to be accurate at the time of its recording, realize this channel and its author makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in this video.
ADVERTISER DISCLOSURE:
Jake is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to www.amazon.com. Additionally, other referral links are included and this channel does receive compensation for sending traffic to partner sites. Shopping through our links is an easy way to support the channel and we appreciate and are super grateful for your support!
3 سال پیش
در تاریخ 1400/05/20 منتشر شده
است.
18,414
بـار بازدید شده