The Iron Condor, Elegant Bird Or Trading Strategy?
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.
To learn to day trade, one must know the origins of the terms commonly used with this technique. The shape of the profit to loss graph is the derivation of the Iron Condor term itself. This shape closely resembles a bird with wide, spread wings, like a condor. The abirda itself consists of two partsa"the inner options, or body, which refers to the inner options, and the outer options, which refers to the wings of the acondora.
The position of the spread symbolizes the Iron term. This is located across the price of the fundamental device. The fundamental device has one vertical spread that is below and above a current price. Different Condor techniques consist of the same basic shape as the Iron Condor, however they are worked in a different fashion.
There are two types of Iron Condor options trading a"the short Iron Condor and long Iron Condor. The short Iron Condor trading technique is an approach where a trader will trade or buy long options contracts for the inner (body) strikes. These strikes are both out-of-the-money strikes. In succession with the buying of long options, the trader will sell options contracts for the outer (wings) 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.
In adopting the Iron Condor, you may reap its positive benefits. A helpful benefit is the Iron condor has the same benefits and margin perquisites as a single vertical spread. The gains are a potential profit from double net credit premiums.
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.
To learn to day trade, one must know the origins of the terms commonly used with this technique. The shape of the profit to loss graph is the derivation of the Iron Condor term itself. This shape closely resembles a bird with wide, spread wings, like a condor. The abirda itself consists of two partsa"the inner options, or body, which refers to the inner options, and the outer options, which refers to the wings of the acondora.
The position of the spread symbolizes the Iron term. This is located across the price of the fundamental device. The fundamental device has one vertical spread that is below and above a current price. Different Condor techniques consist of the same basic shape as the Iron Condor, however they are worked in a different fashion.
There are two types of Iron Condor options trading a"the short Iron Condor and long Iron Condor. The short Iron Condor trading technique is an approach where a trader will trade or buy long options contracts for the inner (body) strikes. These strikes are both out-of-the-money strikes. In succession with the buying of long options, the trader will sell options contracts for the outer (wings) 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.
In adopting the Iron Condor, you may reap its positive benefits. A helpful benefit is the Iron condor has the same benefits and margin perquisites as a single vertical spread. The gains are a potential profit from double net credit premiums.
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.
About the Author:
TheScienceOfTrading.com provides 90 free minutes of videos on stock option investing and provides a complete and detailed option trading course for beginners to experts.
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