Iron Condor

Learning how to correctly adjust iron condor is possibly the most important skill iron condor traders can learn.

While yes it is true that the iron condor spread has a high probability of winning (sometimes as high as 80 percent or even 90 percent) – the manner in which these spreads are constructed when they get into trouble – they can get into BIG trouble – due to the fact that this option spread strategy has an extremely challenging risk to reward ratio.

Many iron condors that non directional trading sellers utilize are of the 10 delta or less style – and these trades usually risk far more in dollar amount then they can ever give off. If a spread trader isn’t careful – and they let one of these trades ‘get away’ from them in a volatile month – it certainly is possible that a trader can at a loss point on just one of these trades that would take many winning months just to get back.

Whether a option seller is skilled at adjusting iron condors as they move against them – or simply has a risk management plan that will get them out of the trade at a predetermined loss point – in order to have long term success with the iron condor proper risk management is key.