Following trade is for educational purposes only. An Iron Condor is an option strategy, where the expected outcome for next week is range-bound.
A CE option mentioned below is a European Call Option, while a PE option is a European Put.
A hedger always buys these options and a speculator mostly sells one.
But when the speculator only sells these options, the risk involved is unlimited and the margin requirement is also high. This is called naked option selling. When both CE and PE are sold, it is called a short strangle.
In combination with this, if we buy much farther CE and PE, the short strangle becomes an Iron condor. Here, the idea is to capture the option premium in a range-bound market with reduced risk and margin compared to short straddle.
The spread between buy and call leg is based on optimum use of margin. Since the option premium is credited to us in advance, it is also a credit spread.
Since this week the view is bearish , we are taking only the CE leg of Iron Condor. As the week progresses, additional trade may be added.
Please leave a comment if you need further clarification on the following trade
My concept of trading is not to be an overnight millionaire, but a disciplined method to grow the wealth that you own. Please leave a like if you like the trade ideas :)
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Sell 34400PE, Buy 33800PE Convert to Iron Condor
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Exit 34400PE, 33800PE Sell 34600PE, 34000PE
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Exit 34600PE, 34000PE Sell 35500PE, Buy 34900PE Convert to Iron Butterfly
Trade closed manually
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Since, today we had the highest drawdown so far, we will be revising the minimum capital requirement as follows
Revised Minimum Capital= Initial Minimum Capital + Max drawdown = 50k + 5k =55k
No worries bro. Drawdown is part of the game.. this was sudden spike and trap by operators which is beyond anyone control :)
AlphaGainers9
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How about covering 35500 CE? It shot up like anything
muhd_nihal
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@Parth0906, In this model we will cover only by laddering PE up, and ends with the conversion of Iron Condor to Iron butterfly. Then we wait for mean reversion and close.
If it does not mean-revert, we gracefully take the maximum loss. There is a way to take debit spread during an adverse trend for covering. But like I have mentioned in another post, it is not part of this model. Hence, I am not mentioning it here.
muhd_nihal
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@Parth0906, Right now, it has mean reverted and our loss is at 3.3k. If the price stays here our loss will be 1.6k by end of expiry.
ibb.co/q9jGkY9
AlphaGainers9
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@muhd_nihal, cool bro. Looks like it will be sideways today.