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Iron Condors This trading plan is similar to but not exactly the same as the TOS Iron Condor Trading Strategy St PowerPoint Presentation
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Iron Condors This trading plan is similar to but not exactly the same as the TOS Iron Condor Trading Strategy St

Iron Condors This trading plan is similar to but not exactly the same as the TOS Iron Condor Trading Strategy St

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Iron Condors This trading plan is similar to but not exactly the same as the TOS Iron Condor Trading Strategy St

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    1. Iron Condors This trading plan is similar to (but not exactly the same as) the TOS Iron Condor Trading Strategy Steve Fought stevefought@aol.com

    2. DISCLAIMER: This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. You should make your own decisions based off your own research, and tolerance for risk.

    3. Just a Side note Distinguish between Trading vs Investing Short term Trading account vs Long term Investing account

    4. Investing vs Trading Trading My Trading account is just a small Portion of my IRA The larger portion of my IRA account is now in the cash fund VMMXX TAXES For time being, just to keep it simple, All my trading is done inside the IRA so no profits need to be reported to IRS each year But then at the same time, no losses or business expenses can be deducted each year either. Once I get trading strategies perfected, then I will open another account outside the IRA to be able to write off business expenses and Losses. Probably will set up DBA business at that time. Investing My Long Investing account is my whole 401K The Bulk of my past money is now in the cash fund. They call it the Money Market Stable fund Return is around 1% or so APR But each paycheck, all my future money is going into stock funds now. Diversifying into 6 different stock funds International, Small Cap, Mid Cap, Large Cap, Value, Growth All this is just a simple Dollar Cost Averaging investing plan

    5. One Long term Investing Strategy The next slides shows how one Investools trading strategy helped save me tens of thousands of dollars during the market crash of 2008. i.e. It helped me get out of a lot of my 401K stock positions and into the 401K plans Cash (Money Market) funds before the market crashed

    7. MONEY MANAGMENT Keep your risks low Only risk 3 to 5% on each trade. A lot of good traders report blowing up their accounts a few times before they learned how to trade. See the Classic Reminiscences of a Stock Operator, Edwin Lefevre , 1923 Try not to blow up your account during the learning curve. For a good video series on Money Management, see http://www.informedtrades.com Click FREE COURSES See box on BEGINNER COURSES Click INTRO TO TRADING BY AIRELON Watch the 20+ videos in MODULE 2: MONEY MANAGEMENT

    8. The Iron Condor Trading Plan This trading plan is similar to (but not exactly the same as) the TOS Iron Condor Trading Strategy Steve Fought stevefought@aol.com

    10. GENERAL TRADING PLAN OUTLINE Generally, I am sticking with the TOS Iron Condor strategy The TOS Iron Condor strategy is the plan you will hear if you go to a TOS advanced options class Don Kaufman is typically the class instructor Brian Cox has MP3 from seminar at XSPROFITS web site of this seminar My only change (still testing) is to pull the plug (buy back the position) when the trade starts to lose money i.e. after market touches or passes the short strike This is an adjustment procedure Exactly how much if any loss I take before pulling the plug is some math I am still working on. Statistically, I think TOS says my idea wont work - but I am going to test it anyway. There might be periodic months of small loses but I want to take protective action in the future to prevent the big loses I took in Oct and Nov. The last TOS seminar , Joe did not really have a solid answer for when to pull the plug Although, he said at some point you need to just get out of a trade Finance the cost to buy back a position by selling another condor Try to keep your delta as close to Zero as possible (Delta Neutral) Do this by Layering in trades - add condors over time - and add condors as underlying price changes You are essentially adding inventory and then managing inventory Keep each trade small Money management Condors are risk defined You know how much you can make and lose going into the trade

    11. Next 3 slides are some other places you can get even more in depth info on the TOS trading strategy

    13. Plus, Here is a relatively new Video with Don Kaufman showing step by step instructions on one way to enter an Iron Condor and then a little on Analyze tab. Go to TOS web site click SUPPORT tab and you will see this new icon

    14. Best way to get overview of this trading strategy is go to a TOS seminar (Typically Don Kaufman is the instructor but it can change) Seminars are free for the time being To get the next seminar location and time Go to https://www.thinkorswim.com Click SUPPORT Click OPTION SCHOOL Click CLASSES Click ALL OPTIONPLANET SEMINARS SEE THE SCHEDULE See schedule for COMPLEX STRATEGIES FOR TRADERS for next seminar in your area

    15. A Step by Step Procedure for Entering and Exiting Iron Condors (My version of Dons TOS Iron Condor seminar ideas)

    16. When to Enter Trades Never enter during Expiration week Pick the Option Month which has 30 to 70 days left in the option before expiration 40 to 50 days seems to be working best for me recently. Try to get into Condors when the Volatility is relatively high per next slide.

    23. Calculating Probability of success with Condors MID PRICE Adjust the distance between the call vertical and the put vertical to get a mid price of .70 to .80 REAL RISK The 2 wide vertical spreads thecredit to open trade (say .70) = real risk of only 1.30 2 - .60 = 1.40 or your real risk 2 - .70 = 1.30 or your real risk 2 - .80 = 1.20 or your real risk PROBABILITY OF SUCCESS Thereal risk from above of1.30 / the 2 wide verticals = 65% is the probability of success. 1.40 / 2 = 70% 1.30 / 2 = 65% 1.20 / 2 = 60% DELTA NEUTRAL - To start off Delta Neutral, you want your short put and short call to be equal distance away from the current price of the underlying. Underlying are things like the SPY or QQQQ or IWM or RUT, etc

    27. PROBABILITY verses RISK Discussion Normally in investing , if you risk less money you would think your probability of success would increase. This is because , the less money you have on the line, generally speaking , you are risking less You might see some web sites selling a condor strategy with the wording like We only enter high probability condors or spreads that have very little probability of expiring in the money. In other words, we only enter trades with a very high probability of success. What they fail to mention is (with condors) as your probability of success (or staying in a price range) increases , so does your financial $ risk. It is an interesting twist on words. Success in terms of an Iron Condor means your underlying price stays in a range see chart in following slide The range is between your short strikes You want the underlying price to stay in a range between your short call and short put strikes As the probability of success increases with a condor so does your financial $ risk. This is because with Condors, the higher the probability of success, the less premium you collect up front. That premium is what you use to reduce your financial risk.

    28. The goal of every Condor manager is to Collect as much money up front as possible Generally , shoot for a 60 to 70% chance of success 68.27% is one standard deviation in a normal distribution Let time and volatility cause the options to decay in value Then, Try to buy back the position as cheap as possible later. When you enter a trade, TOS will tell you what your Max possible $ loss or Risk It is a defined risk trade When you sell a Condor, you collect some money up front. This is the premium. Max $ Loss Possible The premium = Your actual $ possible loss or $ risk So as your premium decreases, your max possible $ financial loss increases. The less you collect up front, the higher the probability of success. So what is strange here is your probability of success can increase but your Max Possible financial loss will also increase. The Long call and Long put in a Condor are just thrown in there as insurance. You dont want to sell a Naked Put or Call without some insurance.

    30. WHEN TO EXIT CONDORS - Page 1 (Below is pretty much right from the TOS BEYOND THE BASICS workbook) Always Exit 4 to 10 days before Expiration on a consistent basis is statistically the best plan according to TOS / Don Kaufman My adjustment since Nov 2008 is to exit when the underlying price crosses the short put or call strike. The plan is to sleep better Take small losses to prevent the big losses like I incurred when the market crashed in Nov 2008

    31. WHEN TO EXIT CONDORS page 2 (Below is pretty much right from the TOS BEYOND THE BASICS workbook) There are other cases when it might be prudent to close out the position before expiration VERTICAL PRICE DROPS TO .015 OR LESS As noted earlier, If either the call vertical or put vertical is trading at a very cheap price, say $0.15 or less, it may be an opportunity to close it out. Stocks rarely move in one direction non-stop; they typically reverse after a move up or down. If the put or call vertical decreased in value substantially because the stock has moved away from the strike prices, it may be best to take that spread off before the stock begins to retrace that movement. LEAVE OPEN CHEAP LONG OPTIONS If the long option in any spread is trading very cheaply, at say $0.05, do not close it out. Only buy back the short option. You will now own a long option that may become valuable should the stock make a dramatic move. BUY BACK CHEAP SHORTS Normally, you will just buy back the whole vertical before the short positions get cheap NEWS c. If news is coming out, such as an earnings announcement or economic or political news that could dramatically increase the overall market or the underlings volatility, it is usually wise to close the trade. 80% PROFIT d. It usually makes sense to close the entire trade whenever it will realize you 80% of the potential profit. That is, if you sold an Iron Condor for $2.50 and can close it out for a $0.50 debit, you may want to do so. That takes the profit on the trade and prevents a winner from turning into a loser if the stock or index moves sharply. When the Iron Condor is so cheap, the extra profit you could make by holding onto it does not offset the risk of the position.

    34. Overall Trading Strategy Idea Try to keep Delta as neutral as possible Try to keep Theta as high as possible Layer in Condor inventory over time to keep delta neutral. Enter Condors when volatility is higher. Ride the volatility down Layer in Calendars over time to keep delta neutral. Enter Calendars when volatility is lower. Ride the volatility up.

    35. HOW TO DOWNLOAD YOUR ACCOUNT INFO INTO EXCEL This is a good way to check your overall returns. Downloads include ALL your costs including commissions, SEC charges, etc NOTE: This is only practical if you are familiar Excel spreadsheets,

    37. Processing the download Go to Excel. Save the CSV file as an Excel file first Just keep the top of the file which is your changes to cash balances. Delete the bottom data Establish a starting point for your account balance. Do not add or subtract any cash to the account. The only changes after the starting point should be your trading activity. If you add or take out large chucks of cash from your trading account, then the math for calculating return is beyond me. Maybe just take an average. Like my account started off x. Next , remove your current open Condors if they have not yet been at least partially closed.

    38. SOME HELPFUL AND INTERESTING WEBSITES and BLOGS

    39. CHARLES KIRK Good for a quick summary of current market http://www.kirkreport.com CONDOR OPTIONS Strategy is similar to the TOS - Don Kaufman http://www.condoroptions.com

    40. AIRELON Daniel Shy Paul Young AIRELON (Dan TV) His daily blog is at http://investorandtrader.blogspot.com/ His whole series of Vlogs is at http://www.informedtrades.com Daniel is another full time trader like Charles Kirk More philosophical and big picture. Swing trader and Position trader Also does a fair amount of futures trading He started with Ken Robert also ..in 1996 Not as much into the details or step by step procedures on how to actually do trades.

    41. DAVID WARING http://www.informedtrades.com Dave has compiled a whole series of free education videos including the Airelon series plus many more.

    42. Free VIDEO on Condors Using Iron Condors to Profit from Fear By Jared Woodard jared@condoroption.com 212-203-0693 Here is the link http://www.commoditytradingschool.com/index.php?option=com_content&task=view&id=144&Itemid=76 Or another way to see the video is go to http://www.condoroptions.com/ Then click BLOG - Then go to the Aug 8th article and click the link - or go to commoditytradingschool.com - And click RECORDED CLASSES - Then just click Condor Options with Jared Woodard July 31, 2008 Jared Woodard is one of the principles of Condor Options.com out of New York. Finding the people behind the Condor Options web site is not all that easy to do.

    43. THE END Thanks !! stevefought@aol.com