Very Low Premium for Iron Condor News Trades

#1

So I’ve been watching news trades for the last 3 weeks, and I’ve noticed that there is very little premium in the pricing of spreads prior to news events; so little that none of the minimum profit recommendations for Iron Condors have been hit (except FOMC 3 weeks ago, which was profitable, Thanks!). And it hasn’t even been close, not like minimum profit of $35 and there’s only $20-25, but it’s like $10 of total profit (both sides combined).
Just wondering if you other news traders have been seeing this too, and if this is unusual / reflects a change in the pricing of spreads on NADEX or something.

Also for Darrell, I understand that this should mean to look for Straddles, but I realize this requires more research than just flipping the max profit on an Iron Condor and making it your max risk on a Straddle. Is there any chance that you could include a conservative Straddle max risk on a few of the Iron Condors (as an “if the Iron Condor’s not there”)? I realize that some news events aren’t suitable for a Straddle, and more importantly, this is asking for more work where you’re already providing a huge resource for us traders (thanks again!), but maybe it’s not too much more if you’ve already got the historicals for the Iron Condor set up.

Thanks, Mike

#2

I’m guessing you have not watched all of them as there have been quite a few that have had them.

A lot of it depends on what time you get in. Sometimes you have to layer into the trade although that is no ideal. The further it is to expiration and the earlier you get in the more premium should be there.

Sometimes IV is lower overall and that will make it more difficult to get the premium. Nadex does not price the binaries or spreads. The markets do trader like you and I, market makers, and Implied volatility in general. If IV is low then the premium will be less. This does not mean its bad it just means you have to adjust your thinking on how to have a potential trade.

If the premium is not there then there is either A no trade - or be if its cheap enough to pull of a straddle within the expected move (ie 35 pisp would mean that is far as we expect it to move then one could consider a straddle - though i rarely do them unless i state to do them as that means we expect the move to be < 35 pips if we say minimum profit of 35 pips). I want to tell you though that I will not list potential straddles on these with specifics as it is completely case by case basis and they have a LOT lower probability of being profitable as we Don’t expect them to move that far most of the time and that is the point of the condor.

The news plan is not just for placing news trades its for knowing what to expect from the news on specific instruments.

Also its there to get you to think outside of the box. You may be able to profit by placing the trade. you may be able to place a spike striker or other trade when the news event comes out (especially if it moves the expected move and then gave a spike striker to reverse). You may on other systems use it to tighten stops, avoid a bad entry as the expected move has happened, or look for a reversal on another system with the added confirmation of the expected move happening off the event.

There is a lot of ways to use the news plan besides just the basic expectations and potential plays if the premium is there.

#3

Perhaps I’m reading them wrong then, as I’ve watched (mostly woken up for, I’m PST) 99% of them for the last 3 weeks. I’ve seen a couple straddles hit the maximum risk, but the only Iron Condor that I saw that was even close on min profit was one of the FOMC Iron Condors.

Methodology: Using the Spread Scanner, looking at max profit on each side, then adding them to find total max profit (or minimum profit as it’s usually worded on the news trades).
I always check at the “as early as” time, but if it’s not there in the first 15-30 mins, I’ll usually call it and go back to sleep. So if my pricing above seems correct, maybe the trades you’re referencing were ones that needed to be legged into, or maybe the premium increased closer to the event and I needed to watch it longer.

Anyhow I understand your reasoning for choosing IC’s over Straddles on many events, maybe I’m just frustrated from waking up at 3, 4, or 5 to see that I can get $4.80 + $1.20 of profit when we’re looking for $20-25 lol. Hopefully the IV is there on some of them next week. I’ll keep looking for the the ICs and Straddles to be there, but I’ll definitely take your advice on adding in the spike striker at the release.

#4

The news plan is much more than getting every iron condor. And there is more than one way to trade them. LIke i discussed on last nights how to trade the news webinar it gives me expectations of movement. Sometime i can do an iron condor or straddle on them. Sometimes i have to leg in. Sometimes i have no straddle or condor but very often i have a spike striker trade regardless of an iron condor or straddle trade. I would say a majority of the time. And that is also times i know when the news will happen then within 5 to 30 minutes after that I have an entry or i don’t. Of course you can do spike strikers anytime. Not sure i would wake up at 3 or 4 am to do news trades. If they don’t fit how you want to trade focus on other trades. Just use them for expectations of movement when your normall trading and again you could just wake back up after the news to look for a spike striker which will confirm with 5 to 15 minutes after the news trade and will be filled if valid shortly therafter. I taught how to do this on oil a few weeks back but you can do them on any news event as I discussed last night. Don’t stick it in a box watch the webinar from last night it addresses many of the post you have made.