I am trying to create a system/plan for the Iron Condor Strategy in NIFTY and BankNifty. Wanted inputs of how everyone adjusts there iron condors here. What are the trigger points whether delta doubling or breach of short sides etc. and how does one makes adjustments then?
It depends on the view you have on the market. Few suggestions I can list are,
- Roll down/up the untested side. I usually do it when the tested side premium is double the value.
- Wait for a day or so, even after this if the market is moving aggressively in the opposite direction do a martingale. I.e close the tested position and sell twice the quantity to open the new position.
- Even after this if you are still making loss. I will just close the position and take a fresh trade.
I just usually have multiple strike in the iron condor to reduce the risk(reduces the return as well)
If one side of iron condor is breached covert it into ironfly watch tastytrade how to manage you will learn a lot
Ironfly will also be breached, how would you do that?
Ironfly is formed by rolling down/up your untested side to the strike price of the tested side. You would have already adjusted 2-3 times to reach this state.
From here, the best option is to close the trade instead of fighting with it.
If you still want to adjust, you can go inverse but you have buy back for a loss (most cases). This can be used to limit the losses. However, since it is already a risk defined strategy, no big advantage my going inverse IMHO
@Vivek_Manohar iron fly defence while starting with Strangle seems more of a natural transition. Have you tried that? You prefer leading with IC compared to Strangle?
Definitely strangles are easier to manage and adjust. I prefer ICs mainly because of the margin benefits. Strangle decays faster and can get out of the trade once we reach a good profit target My trades usually are strangles on the monthly and ICs on the weekly. Even in the ICs, it is not a strict iron condor, the protection I buy are more for margin benefit than to define the risk.
even i do strangles both weekly & far months…no adjustments ever needed as long as you know the safe strikes…conservative but consistent
Ic have width say 100 points you collect approx 60 points
N now say your 1 side breached means you will be at a loss of approx 40
Now you convert other side to iron fly you will put 30 points with you (book profit)
You will recieve credit
N move on
For successful trading with this strategy you need to have position in various different scrips single script will not work
You will require high capital
This model will be successful only when stupid SEBI removes exposure margin for hedged trade currently it does not make economic sense
Only this big brokers who provide margin money on high intrest are getting benefitted
When big money of NBFC are involved y brokers would work in our favour MONEY SPEAKS they must be lobbying hard
If you want proof listen 5 paise this quater concall they said we get approx 21.5~ percent intrest this is free money with hedged option players they bear no risk n sniff all the
And those penny buys, could at times help if you choose to roll the tested side I suppose @Vivek_Manohar
What is Long Call Condor Option Strategy?
- Long Call Condor Option Strategy is a range bound strategy. It offers a good Reward / Risk with low cost. Long Call Condor is directional neutral strategy.
When to Execute?
- When you expect less volatility in the stock. It is similar to Call Butterfly Spread with variation that instead of selling 2 ATM Call , we sell 1 ATM Call and 1 OTM Call.In scanario where strike difference between 1st and 2nd strike is not equal to difference between 3rd and 4th strike;it is known as Modified Long Call Condor Strategy.
What is the Trade?
- Buy 1 lot ITM Call, Sell 1 lot ATM Call, Sell 1 lot OTM Call and Buy 1 lot deep OTM Call.
What will be maximum profit?
- Maximum profit in the strategy is when stock expires between the two short calls. Maximum Profit is difference between first and second strike less net outflow.
What will be maximum loss?
- Maximum Loss is net outflow between buy calls and sell call. Maximum Loss is when stock expires at or below first strike or at or below highest call.
What are the advantages?
- Long Call condor provides a high yielding strategy with low cost. It is best suited for low volatility stock. It is idle for current month expiry.
What are the disadvantages?
- Time decay is harmful if the stock is below first strike or above fourth strike call and advantageous if the stock is between second and third strike call.