Iron Condor – Novice Traders Beware

Iron Condor – Novice Traders Beware

by Ted Nino on December 21, 2011

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Let’s go over the pros and cons of the iron condor trade as it is becoming a popular option trading strategy. The iron condor strategy can give off really great gains – but it is vital for traders to understand the risks involved before trading this method.

The iron condor sounds like an odd strategy – but it is really quite easy to understand. It is just two different credit spreads place on the same underlying.

When asked if the iron condor is a suggested trade for beginning options traders to be putting on, the answer is both ‘yes and no’ – however the strategy really is not recommend if the rookie option trader hasn’t had good, basic training in how options work and how to correctly and effectively manage risk with these types of trades.

A well known potential hazard of the iron condor strategy is it’s risk to reward set up. The maximum possible reward these trades can give off can be ‘dwarfed’ by the maximum possible loss. Let’s look at an example – we put on an iron condor where our potential max gain is five thousand dollars. In this example the max potential risk might be twenty five thousand or even greater.

Now while the above example might scare some off from trading the iron condor strategy – it really shouldn’t – because even though there is an awful risk to reward ratio that can come with these trades – as long as one uses the proper management and adjustment methods – this really doesn’t need to be a problem.

In the end, the iron condor strategy really is a great trade and a great way to create consistent income – you just need to make sure that you totally understand the strategy and you know how to adjust.

Ted Nino is an option selling fanatic – exceedingly zealous about trading the iron condor . Visit his iron condor Website to learn more about his unfussy paint by the numbers method for riding this strategy for reliable income.

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