Trading Iron Condors in 2011

It’s 4½ months into the year and I’ve found this to be one of the easy periods for iron condor traders. Of course, that’s a personal opinion, based on my results. Here’s someone who seems to disagree, yet has made decent money with this strategy.

Christopher Smith at

This year I committed to an experiment that has me trading an iron condor on the SPX every month – regardless of market conditions. The purpose of this exercise is to demonstrate techniques for managing risk and prove that with diligent risk management it is quite possible to limit losses while still creating profitable opportunities.

This year has not been particularly favorable for iron condors, but we have managed to avoid any significant loss and currently we have what amounts to a 20% yield on capital of $5,000 while risking approximately $4,000 or 80% of the capital – holding $1,000 or 20% in reserve.

One of us is living on a different planet. If not, then this comment illustrates that trade selection and risk management techniques vary tremendously among traders. I always knew that traders are different, but cannot see how Chris sees early 2011 as not favorable for iron condors and from my perspective, I could not disagree more.

It’s not a good year for the strategy, but he has already earned 20%?

I think it’s been a very easy year and have earned more during this period than I have ever as a retail investor (over a comparable period of time). I mention this for one reason: I didn’t have to do anything. No skills required. Just trade the iron condors and then exit. Perhaps a minor adjustment or two, but nothing special. I know these returns are not going to continue. And to be honest, I don’t expect to ever see a five month run that is this profitable again. Nor one as easy to manage.


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