The Iron Condor is perhaps the most dangerous option strategy around.
The thing is, when rookie option traders first hear of this strategy (perhaps from a late night infomercial or free hotel seminar conducted by slick salesmen touting it as the greatest thing since sliced bread) – very few seem to able to resist the temptation to jump right into trading them head first – with actual real hard earned money on the line – and usually way too much of it.
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 stop.
I don’t want you to get the wrong idea here. So let me explain something.
I LOVE iron condors.
And I think it REALLY IS a good solid trade.
And yes, I absolutely believe all those stories and claims you hear swirling around about iron condors generating ten percent plus monthly returns and providing trades that have the probability of winning somewhere in the range of eighty to ninety percent. In fact, I KNOW those stories are true because I see it happen all the time in my very own trading account.
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.
See, while it may be true that the iron condor and credit spread strategies can kick off yields of over ten percent monthly and that they favor the trader by offering high probabilities of winning (in some instances as high as 80 and 90 percent) – what isn’t being talked about is the risk to reward ratio of these trades – which can be as high as 10 to 1.
10 to 1! That means that in order to try and make just one dollar, you need to be willing to risk ten. Or, put another way – in order to make 100 dollars, you need to risk 1,000 dollars. Or – risk $10,000.00 to hopefully make just $1,000.00!
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.
Even with the ten percent monthly returns and the high probabilities – all that needs to happen is for a problem month to come along (and it WILL, believe me) – and the next thing you know you’ll be staring at a gigantic loss and a zero balance account!
However…
All is not lost…
Because – as I wrote previously – I REALLY DO like the iron condor strategy.
And – I consistently make money from it.
So obviously there’s a way around that horrible risk to reward issue and the inevitable problematic losing months.
And yes, there certainly is.
It all has to do with the management of the trade.
As soon as you discover the ‘right way’ to place these trades initially – and then how to properly go about managing and adjusting them – that risk to reward dilemma instantly vanishes and goes away.
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 how to properly trade the Iron Condor Strategy for consistent monthly income, go to this Iron Condor Adjustments website and watch our Free Video and get our Free Report.
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Tags: Currency Trading, finance, Forex, Forex Trading, investing, investment, iron condor, option trading, personal finance, stock, stock market, stock trading, Trading, wealth building