The Iron Condor is a commonly used stock option trading approach that employs two vertical spreads, a Bull Put Spread and Bear Call Spread that are positioned so that they both have the same expiration. In this strategy, the number of put spreads is the same as the number of call spreads.
Understanding day trading requires that the trader must be familiar with the terms associated with the Iron Condor. Profit to loss graphs are the definition of the Iron Condor. It is an analogy to its counterpart in animal life. The graph is very similar to a condor with spread wings and very wide. The Iron Condor consists of two parts, the inner options (The condor's body) and the outer options(The wings).
The "Iron" term originates from the position of the spread. The position is placed across the spot price of the underlying instrument. The underlying instrument consists of one vertical spread below and above the current spot price. Other acondora trading strategies have the same basic shape but these are played differently.
The Short Iron Condor and Long Iron Condor are two examples of trading options. Traders who practice buying and trading short options for the inner body are using the Short Iron Condor technique. This approach consists of trading and buying long options in contracts for the body strikes. This is called out of the money striking. Also, with the purchasing of long options, the trader will also be able to sell contracts for outer wing strikes.
The Long Iron Condor varies as it has a slight difference from the Short Iron Condor. The trader buys options from the outer wings and sells the options to the inner body. A bit of a reversal, however these are also out of the money strikes.
With the many advantages that the iron condor brings, one of the most important are that the initial maintenance requirements are for a single veritcal spread. The advantage here is two net credit premiums and a potential profit that extends beyond other techniques.
Another advantage is that further transaction charges can be prevented by letting the options contracts to expire. This is a direct result from the positioning of the spot price of the underlying line being between the inner strikes near the tail of the option 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. - 15224
Understanding day trading requires that the trader must be familiar with the terms associated with the Iron Condor. Profit to loss graphs are the definition of the Iron Condor. It is an analogy to its counterpart in animal life. The graph is very similar to a condor with spread wings and very wide. The Iron Condor consists of two parts, the inner options (The condor's body) and the outer options(The wings).
The "Iron" term originates from the position of the spread. The position is placed across the spot price of the underlying instrument. The underlying instrument consists of one vertical spread below and above the current spot price. Other acondora trading strategies have the same basic shape but these are played differently.
The Short Iron Condor and Long Iron Condor are two examples of trading options. Traders who practice buying and trading short options for the inner body are using the Short Iron Condor technique. This approach consists of trading and buying long options in contracts for the body strikes. This is called out of the money striking. Also, with the purchasing of long options, the trader will also be able to sell contracts for outer wing strikes.
The Long Iron Condor varies as it has a slight difference from the Short Iron Condor. The trader buys options from the outer wings and sells the options to the inner body. A bit of a reversal, however these are also out of the money strikes.
With the many advantages that the iron condor brings, one of the most important are that the initial maintenance requirements are for a single veritcal spread. The advantage here is two net credit premiums and a potential profit that extends beyond other techniques.
Another advantage is that further transaction charges can be prevented by letting the options contracts to expire. This is a direct result from the positioning of the spot price of the underlying line being between the inner strikes near the tail of the option 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. - 15224
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