There is a myth out there when it comes to Iron Condors.
The myth is that you have to spend countless hours in front of your screens if you want to be profitable. But that’s not true. As long as you have a good risk management plan and you know when and how you need to adjust, then you can automate your exit strategy and spend more time doing whatever it is that you enjoy doing.
Iron Condors Entry
I like to put these Iron Condors about 50-60 days until expiration. I take in a credit for a Bear Call spread and a Bull Put spread. Also, I find a point of potential adjustments if the underlying starts to move towards either of the short strikes. This is what a typical Iron Condor risk profile looks like at entry:
At this point, I set alerts to notify me when I have to make any adjustments. We can see that this trade starts off short delta a move to the upside could put this trade in a very tough spot pretty fast. What I also like to do, is to set GTC orders to close out individual spreads of this Iron Condor when and if I can capture about 50% of max profit of the spread. For example, if I sold a 2470/2460 Bull Put spread and I received about .90c credit for it, then I want to exit this spread by Buying To Close for .40c debit. The trade above was put on in our Trade Alerts Service – Income Navigator.
Trade Exit Automation
After being in this trade for 8 days, SPX traded form 2593 to 2569. Our Bear Call spread traded down to .45c and an order to buy it back was filled. This left a Bull Put spread on with 51 days to go:
Another 13 days go by and with 38 days left until expiration our 2470/2460 Bull Put spread is trading for about .40c, which was triggered by our GTC order.
This trade was closed for about 11% Return on risk in 21 days:
Did I have to sit in front of my screen and watch this trade for 3 weeks?
All I had to do was to make any adjustments when alerts went off. Trade exits took care of themselves.