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Avoid "Rally Risk" In An Iron Condor With This One Simple Tweak

November 15, 2017 By Steven Place

2017 has been "The Year Of The Grind."

Slow, plodding moves higher with very low volatility and short-lived pullbacks.

This is one of those times where you'd think selling volatility is a layup trade... until you realize that the volatility has basically been in one direction-- up.

And that can be a killer for iron condor trades. Here's why...

iron condor risk graph

When you put on an iron condor, you're going to have short exposure in the market. This is because of a few reasons, but simply put... the call spread on your iron condor is going to be a little closer to the price of the market, and will have more short exposure.

When markets are range bound and we see two-way action, then this isn't a problem.

Yet when the market is "grinding," then you can get in a lot of trouble. One-way price action can be devastating.

Here's a simple way to fix it-- unbalance the trade.

By reducing the amount of call spreads you sell, you can end up with a trade that actually starts out with no directional exposure. The tradeoff is that you get a smaller credit on the trade.

But there's another great reason for this trade.

If the market rallies... if we see some new catalyst that causes the whole market to pop... then you can adjust the trade.

You can close out the call spreads you have on, then open new call spreads at higher prices and add size.

This adjustment to your trade will not increase your margin on the trade-- and it gives you an increase in your odds.

If the bull market has you scared about putting on new iron condor trades, this is a great adjustment for you.

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Where you not only get a trade setup but a full video explaining the risk and reward in the trade?

That's exactly what we do at IncomeLab. You can give the service a "test-drive." For $1 you can join us for 30 days to see how you can be consistently profitable with options income trading.

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