Iron Condor – Oh Man, I Want My Mommy…

The Iron Condor is perhaps the most dangerous option strategy around.

The problem is that way too many new option traders slap down significant money and start trading iron condors immediately upon discovering them without first equiping themselves with the proper knowledge and skills needed to trade them properly. They are so captivated by the stories and claims of ten percent months and 90 percent probabilities that somehow they don’t stop to think about what they are going to do if their trade doesn’t go exactly as planned.

And usually what winds up happening is that the market promptly snaps off their arms and legs, smacks them across the face with a two by four, then starts to jab them repeatedly in the eyes. In other words – they wind up getting really hurt.

Now wait -

Let me explain something here before you start to get the wrong impression.

I actually LIKE iron condors. I like them ALOT.

And I think it REALLY IS a good solid trade.

And all those stories and claims about making 5 to 10 percent a month while barely spending any time looking at market – and how the odds are so unfairly on the side of the iron condor trader – and how trading iron condors is just like becoming the ‘house’ instead of the gambler – yes – I believe all those claims and stories too. In fact, not only do I believe those stories – I KNOW they are true – because I experience it myself first hand on a regular basis.

Here is the problem: All those fresh, green and excited new option traders have no idea what they don’t know. This trading options for income thing is like an alien planet – with a whole new set of rules inside a brand new reality. And when the person who has introduced them to this new way of trading just tells them about the good but forgets to tell them about the bad – they wind up jumping in with way too much confidence, misunderstanding, and expectations that are completely wrong.

Yes it’s true that iron condors and credit spreads can be put on with an eighty to ninety percent probability of winning. And yes it’s true that they can generate returns of over ten percent a month. BUT – they also come with a dangerous risk to reward ratio that can be in the range of ten to one.

That means that while trading these trades you are putting at risk 10 bucks for the chance to make just 1. Or – in reality, in the instance of say a standard ten lot index iron condor, you are risking ten thousand dollars for the chance to make just one thousand dollars.

And as my mammy used to say (God bless her soul) – that risk to reward ratio is ‘an awful bad egg’. In fact, it’s an honest to goodness stinking rotten deal.

Just do the math. With a risk to reward like that, even with the great probabilities and wonderful monthly returns – before long a problem month could come along and completely wipe out your entire account!

But…

There is still hope…

Because – as I wrote previously – I REALLY DO like the iron condor strategy.

It’s one of my favorite trades – and it continually generates profits for me.

So clearly there must be a way to profitably trade this strategy without allowing that awful risk to reward issue to get in the way.

And there is.

It all has to do with the management of the trade.

As long as you learn the correct way to initially place these trades, then combine that with a super simple management technique and a few easy adjustment tricks – this risk to reward issue can be completely eliminated and no longer presents a problem.

You just need to take the time BEFORE jumping into the iron condor pool to equip yourself with this little bit of knowledge. A few simple ‘tricks of the trade’ – so when those problem months DO come along (and they WILL believe me) – you will know exactly what you need to do to immediately squash that threat, easily adjust yourself out of the problem, and experience the iron condor for all it’s ‘really’ cracked up to be.

To learn these ‘tricks’ to trading the Iron Condor , go to this Iron Condor Adjustments site and watch my free video. It will show you an extremely simple method for properly placing, managing, and ADJUTING iron condor trades.