Iron Condor - Help

[Sang Froid]

Hi all,

I'm new to the world of options trading and setup an iron condor this morning daily due to expire today. When I got into the position it started -£9, now with about an hour left it's only -£5.80 despite being well within the range? Please can someone explain where I've gone wrong as I have no idea now.

 

[Sang Froid]

So that expired with a loss of £1.80 despite being well inside the range? I thought the idea of an iron condor is to choose a ranging instrument, sell a put option at (x) buy a put option at (x) just underneath the sell and the same with call options and wait for time decay to do it's thing, as long as the price remains inside those bounds you make a profit?

Have I missed something?

 

[0FXTrader0]

cost of the spread between bid and offer of option has taken the profit into a loss

 

[Sang Froid]

cost of the spread between bid and offer of option has taken the profit into a loss

Thank you, I had a feeling it may have been this, I've tried to setup another few iron condors this evening but the spread is prohibiting any kind of profit on IG Index which is quite annoying. I might try some other things, wondering if I could set up some kind of synth condor using S&P 500 and Dow.

Anyway, thanks for the reply.

 

[0FXTrader0]

try trading straddles or even cheaper trade strangles

 

[Sang Froid]

try trading straddles or even cheaper trade strangles

Thank you for the tip, 16 delta strangle certainly looks interesting

edit, I think from what I have breifly read a strangle you still have to have some directional bias where as a straddle though more expensive benefits from volatility rather than direction so this I think suits me a little better.

 

[Windlesham1]

What is a daily option? A spreadbet? Who trades options on a daily basis? Nobody I know

 

[postman]

What is a daily option? A spreadbet? Who trades options on a daily basis? Nobody I know

Millennials.

 

[BeDutch]

Nothing against millenials. However I would,d suggest to first learn the basics, however boring that may sound. Learning the basics, even when using a program where you pay for the program like Options Animal ( disclosure I am a lifetime member and would get a referral fee if you were to mention my name ( BEK at 183mtoption.com ) or a free much less in depth program like FREE Option Alpha, is well worth it and pales with the to be expected AVOIDABLE LISSES when trading before you have the basic knowledge. Trading equities with illiquid options ( I.e. wide bid ask spreads) should be avoided, particularly for multileg strategies. Secondly and relevant fir this thread, if your aim us to be edit from theta decay, rather than direction, you should let TIME do its work I.e. no DAY-TRADING. ONE EXCEPTION TO THAT. see next reply

 

[BeDutch]

The one exception to the no daytradi g suggestion for non directional strategies like Iron Condors, straddles and strangles are Zero DTE far OTM ICs check the comprehensive presentation on this strategy on you tube, or drop me a note so I can forward the presentation

 

[Windlesham1]

Sadly RobinHood makes day trading calls viable -as the a**holes at the Treasury and FED will not stop the money printing, creating a debt mountain that their kids and grand kids will have to pay back for decades.

 

[BeDutch]

The one exception to the no daytradi g suggestion for non directional strategies like Iron Condors, straddles and strangles are Zero DTE far OTM ICs check the comprehensive presentation on this strategy on you tube, or drop me a note so I can forward the presentation

Help me understand why it is Robinhood who makes DAYTRADING calls viable? Or are you simply talking about the technical viability, as opposed to systematic profitable trading?

 

[Windlesham1]

Help me understand why it is Robinhood who makes DAYTRADING calls viable? Or are you simply talking about the technical viability, as opposed to systematic profitable trading?

In a normal trading account you need to show you are a competent trader and you need margin- some accounts need $100k. As I understand it with Robinhood as they are only buyers of calls, their losses are limited to their premiums paid. The effect of them buying calls en masse, however, is to ramp up a stock without needing to own the stock -and in a market that has all but outlawed a drop it's game on for these 'people' .

 

[mpups]

..Please can someone explain where I've gone wrong as I have no idea now.
View attachment 296174

... expired with a loss of £1.80 despite being well inside the range?

(2.8 + 1.8 - 4.2 - 4.0) X 0.5 = -1.8

 

[Windlesham1]

LOL- what the heck is a daily option? What the heck are those prices? FTSE is around 7100

 

[BeDutch]

In a nomral trading account you need to show you are a competent trader and you need margin- some accounts need $100k. As I understand it with Robinhood as they are only buyers of calls, their losses are limited to their premiums paid. The effect of them buying calls en masse, however, is to ramp up a stock without needing to own the stock -and in a market that has all but outlawed a drop it's game on for these 'people' .

That is news to me! I do not have a Robinhood account. My account is with Think it Swim Canada. NOT as good as Think or Sim in the US but close. Never before heard about a brokerage where " they are only buyers if calls". I believe all brokerages make two way markets or facilitate market makers and retail clients to engage in two way markets. In North America there is no competency test, not even sure how that could be done, although if done correctly, I would applaud it. Why require people to take a driving test but permit them to do major financial damage to themselves and their dependents? In Canada the test for opening an account is much lower than 100K, but what you can trade is limited to how much risk the position entails. To say it cruelly, you can do everything to lose everything you have, as long as you pay commission and stay far enough away from risking the brokerage to lose money. So everybody can do a BUY WRITE COVERED CALL, but not everybody can do the risk equivalent naked put sale, sometimes not even when cash secured!

 

[Windlesham1]

CBOE says:
All brokerage firms conducting a public options business must furnish its options customers with the options disclosure document entitledCharacteristics and Risks of Standardized Options. Firms are also obligated to establish suitability in approving a customer's account for options trading, and to ensure that all options recommendations made to customers are suitable in light of their investment objectives, financial situation and needs.

 

[BeDutch]

Yes, so to open the account check the box to confirm that you have read the documents. Have you ever checked such box BEFORE falling asleep reading the fine print? Establishing suitability is in my experience not more than showing I have enough money to cover my losses. In the dozen or more accounts I have ( had), NOBODY ever asked me a substantive question or checked whether I knew when a call was an obligation and when it was a right.... . My comparison with the test required before one is allowed to drive, omitted to stress that driving tests are required in spite of all other drivers trying to compensate for your inexperienced mistakes, whereas option trading is the opposite if someone makes a mistake it takes sometimes not even a split second before your limit sell order which was meant to be a buy us filled. Ever experienced that? I HAVE ( morenthan once ) Now I check my blood sugar level before placing the order LOL OPTIONS RECOMMENDATIONS are a different sory altogether, and require all kinds of waivers and indemnification. But that is because there is ADVICE involved. Brokers as such go through great length to show the do not provide advice. Even several other services which are used and at times blindly copied go through great length to stress ( merely for their own legal protection) that their information is NOT advice but for " education " , " entertainment " or " illustrative " purposes ONLY