It looks like the perfect strategy.
A "turn-key" system where all you have to do is put on one trade a month and you're on your way to instant riches.
Well, it's not that easy.
Don't get me wrong-- iron condors are a great way to build wealth.
What's the Big Deal?
Iron condors are a high odds trade. But with those high odds, it means that losing trades end up being much greater than the rewards.
That means it pays to be proactive when trading iron condors. This isn't a set and forget strategy. In reality, it is all about active risk management.
Adjusting Iron Condors
There are two things you need to avoid when you are trading iron condors.
The first is avoiding trending volatility.
This is where the market moves constantly in one direction. This happens in bull markets when stock indexes "grind" higher, and in bear markets during crashes.
The second thing to avoid is fast movement. If the iron condor hasn't been active long enough to generate profits, the risk of a fast move can put you in a bad position.
So what can you do? Let's take a look at some simple adjustments
1. Initiate the trade with an upside hedge.
One of the interesting things about iron condors is that they always start with upside risk.
If stocks are in a rip-roaring bull market, you can't afford to start off short, because you will end up with a ton of trending volatility. So consider starting off with some bull call spreads or long calls to hedge your upside.
2. Buy Unit Puts
To avoid the risk of a market crash, buy some very out of the money options. This will protect you from any crazy events, like 9/11 or any "Black Mondays" that show up.
3. Have Systematic Adjustment Points
Iron Condors are not a strategy that needs a ton of thinking. It's a more statistically based trade, and you should treat it as such. So what you should do is pick out points where the market has moved enough to require you to adjust the trade.
4. Learn the Art of Rolling
A simple way to view iron condors is that they are the combination of two vertical spreads. When the market moves against you, simply roll one of the verticals closer to the current price of the market. This will reduce the cash needed to be in the trade, reduce some of the directional exposure, and increase the potential for profit.
5. Hedge Around Your Pain Points
The market has this wonderful ability to make you worry so much about your iron condor trade that you exit, and then the market reverses making you feel really stupid. The solution here is to be proactive. Know your option greeks and figure out where you will "hurt" the most. That's where you can choose more advanced hedging strategies, like time spreads, 1x2 spreads, and futures adjustments.
Discover how you can beat the market without timing the market in this special video presentation. Click Here To Watch.