We’re going to look atthe eight common option tradingquestions and answers about trading ironcondors.
Why would anyone trade Iron Condors?
What’s the point of trading ironcondors?
When you look atinvestments in general, there’s nothingwrong with putting your money in aregular dividend paying stock. Letting itsit and appreciate with time andcollect your dividends.
If you want tobe a little more of an active trader andcollect premium every single month, a dividend Iron Condorswould be the way to do it. Also,you don’t need to choose a direction.Whereas with a stock you have to select a stockthat’s heading higher. With Iron Condors,you are trading non-directionally.
Yes, you can skew some things to be alittle more bullish or bearish, but ingeneral, you can go ahead and set thatposition up. If the stock doesn’t move atall, you can still make money. If thestock moves up a little bit, you can makemoney. If the stock moves up a mediumamount, you can even make money. If itmoves up a lot, that’s where you struggle.
If it moves down a little bit, you makemoney. If it moves down the average amount, youstill might be okay. If it moves down a lotagain, you could be in some trouble.
This is non-directionaltrading because what happens is – asstocks go up, they’ll pull back alittle bit. They might power higher andpull back.
Iron Condor Course – Options Mastery #3: Iron Condors >>> Click here
That’s the point with IronCondors – you don’t need to choose adirection, you need tochoose a range. The reason it worksso well is that you’re looking attime-premium decay just like insurancecompanies. They sell you time premium oninsurance, or if you get in a caraccident,you’ve purchased that amount oftime, and they’ll pay you out if thingsgo against you. But you know, ifnothing happens, they collectthat money and thiswhat you do with Iron Condors.
That’s why you would want totrade Iron Condors – because most ofthe time, stocks are not doing much. They’ll go sideways, they mightpower up a little bit, they might pullback a bit, and they’re usuallytrading in a range.
That’s why thisstrategy and these types of trades workout so well.
How long does it take to learnto trade options?
This is a difficultquestion to answer because it’s going to depend on a few factors. Your commitment, How right you areat seeing yourself evolve, and how much time you put into things.
Some people never get therebecause they stop at a point andthey don’t want to pick up another book.They start trading options or IronCondors, and they try to figure thingsout on their own.
But you know, it’stough to write an essay or a book if youdon’t know how to speak English or howto write or create a word structure.Give a monkey a keyboard, andeventually, it’ll create and write a pageor a paragraph. If you havesome basic knowledge of the language, you can do it much faster.
Thesame thing here – you canspeed up the process through courses,through books, through coaching sessions,through watching videos. I would say in general, at least 1-3 years minimum – the time it takes to geta good grasp of understanding in Optionstrading.
That’s just the sheer factof putting on trades, consistently doingit time and time again, makingadjustments and tweaks.
It depends on how much youinvest in yourself – your education, your awareness, how aware youare of seeing where you are screwing up. A lot of people don’t like to look in the mirror andadmit to themselves that they dida bad thing. Most people will brush*t off and push it to something else; theydon’t take responsibility.
We wantto protect ourselves from the hurt orthe damage and that ego. So, if you canget rid of that, you’ll speedup that process.
How many years of trading do I needbefore I trade Options?
Youdon’t need many years of tradingbefore you start trading Options. You canbegin trading Options almost right away.
Basic knowledge andunderstanding of overall market dynamicsor just the basics of how the marketworks are essential. Maybe, one to twomonths of studying the markets andwhat it means.
You can getinto Option trading almost immediatelyafter that because Option trading is itsworld. You don’tneed to go crazy with learning andunderstanding dividends.
If you understand dividends, youprobably also know and understand howthe market operates. You’re looking at trading spreads, and you got to work it from the groundup.
Anyway, you don’t need 50 years of experience before youcan go ahead and trade options.
Do youneed to know technical analysis to tradeOptions?
When you look atoptions overall, yes you have directionaloptions trading – like buying a single putpurchasing a single call. Yes, in thatsense, technical analysis is helpful. It will guide you in what way, bullish orbearish, to go with on a stock or aposition.
But overall, you don’t need a lot of technical analysis.
Ifyou’re doing non-directional trading,like withiron condors or any spreads likea calendar spread. Yes, it will help tohave some technicals because now you canskew that Iron Condor making itunbalanced, a little bit more bullish, ora little more bearish because you seesomething in the charts.
But whenyou create an Iron Condor position, orjust working with spreads, you’re puttingon a non-directional trade. Meaning, nowyou start watching where theprice move. As the price moves inthat direction and starts pressingagainst one of your breakeven points, thenyou go ahead and tweak that position.
So,you’re constantly tweaking and adjustingbased on what you see in the conditions.This is how the real big boys makemoney – they’re not looking at specific a price direction, they’re looking at what do I do with myposition.
I wouldn’t say youneed it, but I would say it is helpful to know some technical analysisbecause you want to know and understandhow far stretched specific prices are tothe upside or the downside.
Besides Iron Condors, what else should Ilearn?
Remember, Iron Condors is astrategy. You’re doing twoverticals – vertical on the left or theput side and vertical on the right or thecall side. You create twoverticals to be able to collect and makepremium or your time decay or theta.
When you look at Iron Condors, they arenegative Vega trades, that means thatwhen volatility goes up, it hurts you.
What’s good to learn beyondjust Iron Condors is to look at somepositive Vega trades. That would bethings like double diagonals andcalendars because that helps offset someof that more significant risk that you haveespecially if you’re trading a more extensiveaccount. Because a huge down move instock prices willpop up that volatility quite a bitand that could damage your positionquite a lot.
I would say, combiningverticals, Iron Condors, calendars, doublediagonals, and butterfly spread, puttingthose things together – knowing those fewdifferent strategies will give you avast arsenal to be able to tradeoptions and be very flexible at it.
Iwould say some positive Vega tradesbeyond Iron Condors is helpful likecalendars and diagonals. That couldhelp round you off.
If you want to dosomething that’s also negative Vega, thengo ahead and take a look at butterflyspreads as well. But again butterflieswith Iron Condors will increase yourVega risk or volatility risk. So if youdon’t understand volatility yet at thispoint, we cover much more of that in thecourse.
How good areIron Condors compared to other Optionsstrategies?
I think Iron Condors are good, in the sense that they aremuch easier to understand becauseeverything is in one month. Everything you do is in one month.
Whenyou look at calendars, the reason they’recalled calendars, is they’re spreadacross multiple months. So when you docalendars, the spread of them is a littlemore complicated and difficult forpeople to grasp and hang on to. With IronCondors, they’re a little bit easier tounderstand because what happens ifyou’re able to dictate yourprobabilities right through a panel.
Ittells you exactly hey I have a 40%chance of success or I have an 80%chance of success. Which one wouldyou rather be on? Most people wouldsay 80% chance of success, of course, butyou make less money. Would yourather be at 80% chance of success andmake $100 or would you rather be at 40%chance of success and make $120?For the extra $20, is it worth thatlower value in probability?
When you lookat strategies, with Iron Condors, it’s flexible to looking at yourprobabilities. They are a more natural way to getinto options. They’re lesscomplicated. So, it’s an excellent way toget your foot in the door when it comesto trading options with Iron Condors.
Other spreads – other strategies, start becoming a little more difficult.Just the construction of them themselves. Yes, you pay a little more incommissions because there are four legs totrading an Iron Condor – you need to sellone and buy one her protection sell oneand buy one for protection on the callside as well. You pay maybe one or twomore on per contract to create thatspread or strategy, but it makes yourlife a lot easier on the management side.Getting into them and so forth.
Ithink they’re perfect and especiallygreat for as a starting point to gettinginto trading options.
How do IronCondors make money?
Iron condors make moneythrough beta decay.
Let’s say yousell insurance as a car insurancecompany does. When you sell thatinsurance, when people don’t cash in ontheir insurance policy, you collect thatmoney.
So think of this as people, everysingle month, giving you money $100 to ensure or protect their stock. That’s what you’re doing – you’reensuring their stock by selling atdifferent strike prices. You’regoing out a little wider on the left andthe right side, and you’re getting alittle bit of premium, a little bit ofmoney, every single month when that stock stays in that little bit ofrange.
Sometimes, things move alittle bit higher, and sometimes thingsmove a little lower. But do you still getthat insurance premium if the stockprice went a little higher? Yes,absolutely. Because let’s say youwere riding in a car, and you had alittle nick and dent or a scratch on thedoor, are you going to call yourinsurance company on that?Probablynot. But when you have some major issues?Yes, you will call your insurance company.
When that stock is just moving alittle bit to the upside, a little bit tothe downside, even a slight bitcould be two-three percenthigher to three percent lower, and you couldstill collect on that insurance premium.
Why do some people never makeany money from trading Iron Condors orOptions in general?
A lot of times it is due tothe knowledge gap. I mean we’ve talkedabout the key three elements that youneed to be able to be successful with trading in general or trading options.
It allstems from knowing and understanding howthings work. So, if you know andunderstand how things work, that’s a knowledge issue. If you have aknowledge issue, you need to goahead and get some of that knowledge.
The other thing is a strategy. Wetalked about strategy in our previousepisodes where if you don’t have agood strategy, you’re just going to be all over the place.
Finally, it’s going to be youractions. If you’re not taking actions,if you’re not adjusting, those things arealso going to play a part in yoursuccesses. Also, a personal mentalityright goes along with those actions.
So,if you don’t know, how do you createa strategy? And if you don’t have astrategy, and then you have no plan inmind, and then you got to do the actions.
What people tend to do is – they do theaction, they do the trading, but theydon’t have the strategy or the knowledge. How dohave a strategy if you don’t have theright knowledge? People start outbackward thinking that they alreadyknow. A lot of times what they’re doingor they get a little bit of knowledgeand insight. So they hop on over, and they go aheadand do the action part not realizingthat they’re still lacking the strategyor lacking the knowledge part.
This is one of the big reasons, of course,there’s many other reasons and factors,but just something for you to considerand think about.
If you’re strugglingwith Iron Condors or trading:
- Do you think you have a knowledgeproblem
- Maybe you have a strategyproblem or
- Perhaps it’s yourself or theactions problem that you might be having
Are you adjusting to thelosses? Are you adapting to yourmentality? Are you too emotional aboutthings?
All those things workhand-in-hand together.
Iron Condor Course – Options Mastery #3: Iron Condors >>> Click here
