By Darrell Martin
Oftentimes traders learn how to master strategies for one kind of market condition leaving them limited when the market isn’t moving in a way they are familiar with trading. This is the second part of a two part series. The first part told of a profitable trade using an Iron Condor strategy. To access the first part or previous article, click HERE. An Iron Condor is great to use when it is unknown which direction the market will go and for a market that may move but could tend to pull back and maintain in a range. The trade from the first part was profitable by itself, but while in that trade there were other ways to trade the same market that hedged the Iron Condor, and also traded the market as it moved directionally, taking advantage of all market conditions.
To review the previous Iron Condor trade, the setup included two spreads: a lower spread bought and an upper spread sold. The ceiling of the bought spread shared the floor of the sold spread, which is the Iron Condor setup.
As time passed the bought spread hedged the sold spread.
Then the market went down again and both spreads started to profit.
As the market continued down you can see how the sold spread now hedged the bought spread. While the market is moving around you can also trade a close proximity spread. Consider the graph showing the tan image. The tan image on the graph shows the spread 4260.0 - 4340 with the price just under 4308.0. As the market continued down that spread is sold.
In addition to the close proximity spread being sold to trade the market direction, cheap Out of The Money (OTM) binaries can be bought and sold. As the market oscillated up and down, there was a filled order during the upside move for OTM binaries near the breakeven level on the Iron Condor. There was also a working order for OTM binaries for a downside hedge at the breakeven point. These trades provided a cheap extra hedge. You don’t have to wait. You can enter a limit order for what you’re willing to pay so you can use OTM binaries to hedge the spreads.
This final view shows a spread for directional trading, an Iron Condor for neutral trading all combined with the OTM binaries for hedging. Basically, all market conditions were covered with these trades and no advantage was missed.
For access to the spread scanner go to www.apexinvesting.com. There you will find free education on how to trade spreads, binaries, futures, forex and CFDs. Nadex spreads and binaries can be traded from 49 different countries and is a US based, CFTC regulated exchange.