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Iron Condor Spread Strategies: Book Review

Jared Woodard, my partner at Expiring Monthly, has produced an outstanding essay published in book format.

Iron Condor Spread Strategies: Timing, Structuring, and Managing Profitable Options Trades $8.99

It cuts to the heart of iron condor trading. With no wasted words, Woodard makes a significant contribution.

Iron Condor Spread Strategies by Jared Woodard

  • Don’t have a lot of time? – this book is short
  • Already know the basics? This book builds on what you already know
  • Want your trades to perform better? This information is valuable

From the introduction:

Iron condors have become popular, but there is little detailed or quantitative information about the best way to employ them. As participants in 2008’s crash and 2010’s bull market can attest, “set it and forget it” is not ideal. I’ll discuss when to enter a condor spread, introduce key structuring techniques and considerations, and present back-tested returns for selected strategy variations

Direct quotes

Instead of taking the approach (as I admit that I often do) that the iron condor is your trustworthy friend, Woodard lets you know that the trade is speculative in nature and that there must be a reason for initiating the trade:

Objective, statistically-significant indications that some asset is likely to be range-bound in the future, provide an excellent justification for a speculative condor trade.


Woodard issues an alert:

The characterization of iron condors or any other option spreads as “income-oriented” is misleading. A given iron condor trade will conclude with a net profit for the trader only if the thesis of the trade proves correct… In this respect, option spreads are no different from any other form of speculation.


I highly recommend this e-book.

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Book Review: Getting Started in Employee Stock Options

John Olagues and John Summa put together an interesting book.  It's an important read if you own, or know people who own, employee stock options (ESOs).

Getting Started in Employee Stock Options explains that most recipients of ESOs  exercise far earlier than the option expiration date – to lock in profits.  As option traders, all of you know that this is discarding many dollars worth of time value.


Olagues


The two Johns provide much guidance is hedging (reducing the risk of owning) ESOs.  If you can avoid exercising prematurely, there's a high probability that you will come out earning extra dollars by the time you do exercise the options.  If you have been exercising, or plan to exercise some of your ESOs in the foreseeable future, read this book. It's worth your time.

If you have friends or family members who earn ESOs and if they don't understand options very well (or at all), get this book as a gift.  They may not need your help, but if necessary, you can guide them through the basic option concepts. 

The book offers a detailed explanation of how people can hedge their options by using exchange-traded options in the same underlying stock.  Tactics include selling calls and/or buying puts, and the authors recommend trading LEAPS (longer-term options)

Why bother with hedging?  It's an intelligent way to maximize gains from those ESOs.  It makes no sense to throw away thousands of dollars in time premium when there are suitable alternatives.

Unfortunately, if your options were issued by a small company that does not have its options traded on an exchange, then simple direct hedging is not available.

Concerned about tax consequences of your hedging trades?  This book has the answers.

Want to know why companies love it when you exercise early?  There's a thorough discussion. HINT: Early exercise forfeits remaining time premium, and that's a gift to the company.

If there's something you want to know abut ESOs, this book has it.  The authors are not shy, offering their opinions on topics of significance.  The bottom line is that this book is not for everyone, but if you are among those who receive part of your compensation in the form of employee stock options, don't miss this book.  

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