Bullshit Free Guide to Iron Condors - Options trading IQ

. Market volatility is picking up, but you want to leave your position open for a few more days to see how it plays out
c. You’re close to expiry and also getting close to you stop loss level
Here’s how you could set it up:
Date: May 1, 2012
RUT: 828.92
Sell 10 May 17 th 770 Puts @1.85
Buy 10 May 17 th 760 Puts @1.30
Sell 10 May 17 th 870 Calls @ 1.05
Buy 10 May 17 th 880 Calls @ 0.55
NET Credit = $1,050
Now we’ll add in our hedge:
Buy 1 May 3 rd 800 Puts @ 0.50
HEDGE COST = $50
TOTAL NET CREDIT = $1,000
This type of hedge is a little more advanced, but might be something worth looking at in certain situations. In this hedging scenario, if RUT has a big fall in the
next 2 days, you will have a little bit of a profit on your hedge to offset the losses on the monthly condor.
In summary, if you’re trading Iron Condors, you need to have a plan for how you will protect against a violent selloff and there are a few different ideas to
choose from. Those who are trading large account sized have a much greater need to hedge than those with small accounts. Also, there can be a time to hedge
and a time not to hedge, during strong bull markets, the need for hedging is lower than in times of market uncertainly or strong bear markets.
Homework Assignment: Re‐read the above section, decide which method of protection is best for your and start adding some rules into your trading plan for
how and when you will add protection for your iron condors.
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