Are Iron Condors a Good Trading Strategy?


When it comes to investing in the markets, a good rule of thumb is that literally anyone can make a dime or two in a bull market, but the great majority of people will lose money in a bear market. That’s just common sense.

However, what do you do when a market is simply just flat? Naturally, most investors are not quite sure what to do when that occurs. However, this would be a good time to introduce you to an investment strategy called Iron Condors.

After you understand the basics, you will realize that this can be an excellent strategy even in a flat market, and here’s why:

5 Reasons Why Iron Condors a Good Trading Strategy

Are Iron Condors a Good Trading Strategy

1. An Iron Condor strategy is actually pretty simple

With Iron Condors, one of the things you are doing is engaging in more than one contract. Your iron condor investment will go up in value as long as the underlying stock stays within the given parameters that you define.

Of course, if the stock price moves outside these boundaries, you will lose out and suffer a loss on that position.

2. Iron Condors are beneficial under the right conditions

According to TastyTrade, the best time to engage in the Iron Condors strategy would be when “enough time has gone by and when the implied volatility is at a level where there are decreases in implied volatility.”

The passage of time is important because it ensures these Iron Condors are a positive theta strategy, That means they are simply options trading strategies that will benefit from the passage of time.

The price of the options will decay over time, so the trader of iron condors will simply wait it out and make a profit on the premiums.

3. Iron Condors can be somewhat confusing

If you are new to options trading, then you had better start slow on this and other options trading strategies.

These Iron Condors can be an easy way to make a dime or two, but you definitely need to have an understanding of the fundamentals. Learning such things as how to “Buy a Call” and “Buy a Put” would be very beneficial to you.

4. More Yield in Your Portfolio

One of the best things about Iron Condors is that they can offer you more yield in your portfolio. There are a litany of ways that you can invest in these Iron Condors to accomplish that goal.

For example, even though this is just anecdotal, there have been several traders who have engaged in a straight call buy with their Iron Condors and were still able to maintain at least a 20% profit or more.

5. Why is the Iron Condors strategy so obscure?

Part of the reason why Iron Condors is a strategy that isn’t quite as well-known as it should is because a large majority of investors look at options trading and immediately rule them out, thinking they are too risky. However, with Iron Condors some of that risk is removed.

Taking a look at the Iron Condors method will definitely help you have a more valuable portfolio!

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Author: Jessica Davidson