My first Iron Condor Trade - question

#1

In the News Trading Plan it seems were basically to look to make $25-35$ with Iron Condors.

I would appreciate any help understanding the math with my first IC trade.

Settlement Details: Buy @ 17751 - Contract: Wall St 30 (Sep) 17400-17800 (4:15PM) Quantity: 1 Expiration Value: 18044.53 Payout Amount: $400.00

Settlement Details: Sell @ 17856 - Contract: Wall St 30 (Sep) 17800-18200 (4:15PM) Quantity: -1 Expiration Value: 18044.53 Payout Amount: $155.47

Does this mean I made a combined profit of $555.47? Far from $25-$35.

Am I missing something or did I just get lucky with this trade? I couldn’t tell from my account balance due to other trades pending.

I was having difficulty trying to find a spread where floor and ceiling come together. I was excited to find the Wall St 30 above and went with it even though the expiry was 4:15pm just to get the experience to put a IC trade on.

  • Poppajon
#2

Hi Poppajon,

Unfortunately you lost money on this transaction. When you buy/sell a spread you are fully collateralizing your end of the transaction. On the buy side your collateral is the difference between the strike price and the floor of the spread (in this case it was 351). On the sell side your collateral is the difference between the strike price and the ceiling of the spread (in this case it was 344). Had the price expired where the two spreads meet (17800) you would have realized maximum profit. In your case the price expired at 18044.53 meaning you realize the maximum profit on the spread you bought (49) but you ended up losing money on the spread you sold (-188.53) for a net loss of 139.53.

There is a very helpful tool under the News Trading Plan tab called the Straddle vs. Condor calculator which I recommend you use on every Iron Condor you attempt. It gives you exactly the information you need to be aware to minimize your risk. I took the liberty of populating the calculator with the numbers you posted to show you:

This shows you that your break even point up on your condor (sell side) was 17903.20 and your trade expired at 18044.53, meaning every point above above 17903.20 you lose $1.

I would watch the videos that are posted recently in the forum on spreads as they will help you going forward. If you have any other questions, keep posting them.

Happy Trading!

Peter

#3

Thank you very much Peter for such a detailed explanation. I see I’ve got a ways to go, more to learn. I’ll keep doing them and eventually it should kick in for me.

#4

No worries, Darrell always states in his training videos that spreads are harder to understand but easier to trade. Once you truly get them down, you will love them. I forgot to put the link to the spread vs straddle calculator in my previous response so here it is now:

http://apexinvesting.net/straddlecondor08252014/straddlecondor08252014.htm

I use this tool each time I do an iron condor and it helps me to see where I’m at with these crazy birds…LOL!

Good luck.

Peter

#5

Appreciate it. :smile: