Iron Condor Legged-In Strategy
This type of Iron Condor doesn’t actually open as a Condor spread but rather legged in as one.
Iron Condor in a nutshell is 2 credits spreads combined.
A legged-in IC started as a single credit spread whether with calls or puts then later on added with another credit spread trade.
There are several reasons to trade an iron condor this way. One is an anticipation of a stock bouncing off its support and continues to travel in its past range.
For example, a stock is trading in its range of $22 and $28 for several months.
At the point of trade consideration, it just bounces off the $22 support line and is expected to move higher.
You could place a $20/$17.5 put credit spread (sell the 20 and buy the 17.5) 45 to 60 days to expire.
If your anticipation is right, this stock heads north higher and now is around $28.
At this point, you can add another spread using call options. To be specific, it could be a $30/$32.5 call credit spread in the same month with the puts spread.
With this way of trading iron condor, you don’t have to wait until the stock lands in the middle of the range.
You can place half of its trade now and take advantage of time decay and collect some premiums right off the bat.
Also, the anticipation of a bounce could permit you to trade the options month longer than 30days. That is, too, give you more time premium to squeeze.
It varies from trade to trade that a legged-in will make more money than its counter-part because stock could take a lot longer to move back to a desire price.
To exit this trade, either let the whole trade expires if expecting the stock to finish in the middle of the 2 short legs or closes it down – buy the whole trade back otherwise.
Please put a comment down below and let me know what you think or have any better idea you think the folks can benefit from.
Happy Trading,
Category: Iron Condor
