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Iron Condor - Owe, I'm Gonna Need A Bandaid. A Big One.
The point is, when rookie option traders 1st hear of this technique (perhaps from a late night infomercial or cost-free hotel seminar held by slick salesmen selling it as the greatest thing since the slinky) - extremely few seem to be capable to avoid the temptation to bounce right into trading them - with too little knowledge about how they actually work - and way too much real money at risk. And it appears that a high portion of them - if not nearly all of them - quickly wind up having their shins kicked in, their heads yanked off, their eyes poked out, and getting hurt really, really bad. Now wait just a minute. Before you start to have the absolutely wrong opinion, please, let me shed light on a thing here. I really, really like iron condors. I like them ALOT. And I absolutely do think the iron condor definitely IS a great trade. And all those tales and claims about producing 5 to 10 percent a month whilst barely taking any time looking at the marketplace - and how the odds are so unfairly on the side in the iron condor trader - and how buying and selling iron condors is just like getting to be the 'house' instead of the gambler - yes - I think all those claims and stories are true too. In fact, not just do I believe those tales - I KNOW they are accurate - simply because I go through it myself 1st hand on a regular basis. The issue is - there is certainly some thing large that is somehow getting left out of all those claims and tales - and this some thing is leading to alot of brand new fresh faced option traders to misunderstand this tactic from the start and thoughtlessly jump into trading them with erroneous expectations. See, while it may possibly be a fact that the iron condor and credit spread strategies can produce yields of over 10 percent monthly and that they benefit the trader by providing substantial probabilities of winning (in some situations as substantial as eighty and 90 percent) - what isn't really getting talked about is the fact that the risk to reward ratio of these trades could be as large as 10 to one. This means that in order to attain those eighty to 90 percent probability trades - you need to risk ten dollars to make just just one dollar - or put another way - you must put at threat of losing $10,000.00 for the chance to generate just $1,000.00. And as my mammy used to say - that sounds to me like 'an awful poor egg'. Which it is. In truth, it's an honest to goodness stinking rotten deal. Because -- as soon as you do the math you will see that even with those excellent monthly returns with eighty to ninety percent probability of winning - all it takes is just one particular difficult month to appear and trigger a loss that will fully obliterate the eight to 9 wins you've succeeded to accumulate - as well as possibly the rest of the whole trading account! Even so... All is not lost... Like I said previously, I really, really like these trades. And - I consistently make good profits trading them. So undoubtedly there's a way around that horrible risk to reward problem along with the unavoidable tricky losing months. And of course there is. And it is this: It's all in how you manage the trade. You see, just as long as you learn how to correctly place these trades from the beginning, then blend that with a very easy management procedure and a number of really cool, simple adjustment tricks - this risk to reward problem can be totally eliminated and no longer an issue. You just will need to take the time BEFORE jumping into making these trades with real money to provide your self with the 'right understanding'. Learn a couple extremely simple 'tricks of the trade' - so when those difficult months DO arrive (and they Will believe it) - you'll know precisely what you should do to quickly squash that danger, adjust your self out of the problem, and enjoy the iron condor for all it's 'really' cracked up to be. Article Directory: http://www.articledashboard.com Ted Nino is an option selling evangelist especially fanatical about trading the iron condor, the butterfly spread, the double calendar spread and the credit spread. Visit his iron condor website at www.ironcondoroptiontradingstrategy.com to learn a super simple step-by-step method for trading the iron condor strategy for consistent monthly income. |
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