@darrel Is there a methodology behind which binaries to choose when hedging your condor? In demo i have been picking a OTM binary near the floor or ceiling of the spread and then i count how many ticks are inbetween the break even on the IC and the binary strike. Then i multiply this by how many contracts i bought on the spread. This will give me the amount i will be down on the spread if the price reaches the binary strike i plan to buy. I then calculate how many contracts i would need to buy to hedge my position to a breakeven. So hypothetically if i would be down 800 from the price moving 80 pips to the binary strike i then would need to buy 16 contracts at $12 (16x12=$192) to hedge my position (16x$50=$800) and then repeat on the other side. Am i doing this wrong or am i right? I just started thanks.
Strangled Condor help!
darrell
#2
Yes the idea is if the underlying moves beyond the breakeven price the binaries will cover most the risk from brrakeven to max risk on either side. You set working ordered on the otm strikes and as time passes or the market moves ideally you get filled on both of them to hedge off the position so it has little risk.
So should i choose a binary strike closer to the break even or closer to the ceiling/floor of the spread or maybe in the middle?