www.onetouchbinaryoptions.com

Iron Condor Option Strategy

In recent years, the binary options market has overall become incredibly transparent, liquid and even better suited for the retail investors and seasoned traders. People are becoming more interested in trading the market because of the many strategies and tools that have made trading easier. One of such strategies that have become popular in recent years is none other than Iron Condor option strategy.

Of all the strategies out there for trading options market, Iron Condor may perhaps be the best of them all, it is indeed the most popular and most used of all other option trading strategies. It is the favorite trading tools of most traders for generating income. It is a strategy that pays about five percent and fifteen percent of the money you invested every month.

Iron Condor is an advanced strategy for skillful traders; it involves the purchases and sell of four different options which have different strike prices in the same month. Iron Condor is created when:

The above suggests that Iron Condor is constructed from 2 other separate spread trades I.e. the bull put spread and the bear call spread. The trader will make his profit if his underlying asset finishes between the 2 spreads however the potential for profit or loss using this strategy is limited because the trader sold 2 spreads. You as a trader will make more profit if the spreads are closer together however it will subject you to the greater risk of not having a profitable trade. On the other hand, the further the 2 spreads are apart the greater chances of having a profitable trade but the profit will be less.

How A Trader Makes Money With Iron Condor?

A trader can use Iron Condor spread strategy to make money by utilizing the credit spreads, a bull put spread and a bear call spread, all having the same expiry date.

binary options iron condor strategyWhen a trader utilizes an Iron Condor strategy, he hopes that the underlying index trades in a relatively narrow range from the time he created his position till the time the options will expire. When this situation occurs and all options are out-of-the-money, the binary options will expire worthless and the trader will get to take home every penny except the commissions he collected when he bought the Iron Condor. This ideal situation doesn’t come true every time, hence the skillful traders can sacrifice some profit, close their position before the expiry date and take their profit.

Iron Condor option strategy works excellently when you apply it with adequate knowledge and skill, there are some traders who use only Iron Condor for their option trading, however, it still have its potential pitfalls and dangers.

It is important you know exactly which stock or index to use with Iron Condor. It is also more important that you know when to properly place, exit, manage and adjust your trades. The reason many people lose their trade while using Iron Condor is that they don’t know when to adjust their trade, they also don’t have a solid grasp on how this strategy works You need a proper plan in place should the trade go against you.

Benefits of Using Iron Condor Spread Strategy

1. Collection of Double Premium: With Iron Condor strategy, you have the opportunity to collect double premium on your investment. This is twice as you would have collected using only a single bear call spread or single bull put spread option.

2. It Guarantees Gains On One Position: Since you are taking double position with Iron Condor strategy you are guaranteed that one of those legs will expire worthless, making sure you have your maximum profits on that half of the trade.

Conclusion

Iron Condor is indeed a very popular and effective trading strategy because of its limited risk approach; you can use this strategy to make consistent money with option trading. It is also a great trading tool because you will never lose more than you have allocated for each trade. Iron Condor comes with high chances of winning your trades and chance of getting greater returns on your investment.