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Adjusting in Stages. The Reality.

Question (black font) and answer (blue font):

Dear Mark, Hello Antonio

Firstly hope everything is OK as you don’t write too frequently in the blog. I am writing much less these days, and most of that appears in my column.

Maybe you remember me Sure I remember you because throughout the years I have done some questions and also was in the premium forum a few months. I got out because it coincided with a strong work time and also left trading because of the poor results.

I came back to the idea of ​​the Iron Condor and re-reading some post I would like you to validate this system and give me your opinion about it.

The idea is to adjust risk by closing in stages as you suggest and I explore the numbers.

In these low volatility times, it seems to make an IC by generating a 3$ credit is very difficult. 2.5$ could be easier with delta 15 ~ It’s a different world today, and we must adapt to current market conditions. Just be certain that you truly like (i.e., you are comfortable owning) the positions you are trading — and not merely following a formula for deciding which iron condors to trade. For example, when IV is low, 15-delta iron condors would be less far out of the money than they used to be. Perhaps you would be more comfortable with a lower delta…maybe 12. That is a personal decision, but I want you to think about it. Do you want a smaller premium coupled with a higher chance of success? It is very difficult to answer that question.

Scenario: I trade 3-month iron condors.

Closing the not-adjusted (i.e., profitable) spread 3 weeks before exp at an estimated cost of 0.50$

I trade 6-lots of the iron condor, collecting 2.50$ in premium for each. Total cash collected is 1,500$.

First adjustment: Close ~20% position (1-lot). losing 100$. I would close only the threatened half of the IC. I encourage exiting the whole iron condor.

Second adj: close ~30% position. losing $ 150 per iron condor (2 contracts) = 300 loss.

Third adj. close remaining 50% position. losing $ 250 (3 contracts) = 750 loss.

Let’s examine the worst (or at least a very bad) scenario: we would have to adjust every month of the year: This is very harsh. This scenario should seldom — if ever — come to pass.

  • Six times: 3 adjustments, exiting entire position.
  • Six times we make only 2 adjustments.
  • Assume that we NEVER get to earn the maximum possible profit (zero adjustments)


3 adjustments:
1500-100-300-750-300 (spread value not threatened $50×6) – 60 (commission) = $ -10 [i.e., we lose $10 for the trade]

2 adjustments:
1500-100-300-300 (spread value not threatened 0.5×6) – 60 (commission) = + $ 740

a) Lose $10 six times per year: = -60

b) Gain 740 six times = 4,560 ….. ….. 4500$ year ….
Total Annual Performance = 4500/18000 = 25%
This would be a very satisfactory result.
Unfortunately the math is very flawed.

***You are assuming that it costs $100 to exit at the first adjustment, but that is the LOSS, not the cash required. To exit one iron condor at a loss of $100 costs $350 to exit.

Similarly, when you exit after two adjustments (at a $150 loss per IC, it actually costs $800 cash – i.e., your original $500 plus $300 in losses).

Exiting after three adjustments costs the $750 loss plus the original $750 premium. Total cost is $1,500.

Thus your numbers should be:
a) The 6 times when three adjustments are required: collect $1,500, pay $350 for adj #1, pay $800 for adj #2, pay $1,500 for adj #3, pay $60 in commissions: Loss = $1,210.

b) The 6 times that two adjustments are required: collect 1500, pay $350; pay $800, and pay $150 later to exit the three winning spreads; pay $60 commissions. Net profit is $140.

The Discussion

As I say I’d appreciate an opinion as deep as possible, because regardless of other possible adjustments we can make, I think the way you handle the IC goes here.

One practical difficulty is this: How aggressively do you try to exit when adjustment time arrives? If you do not bid aggressively to exit the position, the loss may get much higher than $100 before your trade is executed. If you bid very aggressively, then you may be paying too much to exit positions that have not yet reached the adjustment stage. You must think about this.

Honestly I pulled away from trading because i was not getting good results, but I continue thinking that IC are great and that your way is one of the best to do it. Please remember that no method is ever good enough – unless you feel comfortable when trading. Why? Because discomfort leads to poor decisions. Also: When you examine the correct numbers (above), you will see that you cannot make any money when you anticipate making three adjustments approximately 6 times per year. Adjustments are expensive and we make them to be certain that we keep our losses small. However, you must expect to make one or fewer adjustments — most of the time — for the iron condor strategy to be viable.

Please tell me if there is some way to communicate privately. Thank you. Send email and we can discuss. rookies (at) mdwoptions (dot) com



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The Art of Making Decisions when Trading

One of my basic tenets in teaching people how to trade options is that rules and guidelines should not be written in stone and that there are valid reasons for accepting or rejecting some of the ideas that I discuss.

When I offer a rationale or explanation or a suggest course of action, it is because I have found that this specific suggestion has worked best for me and my trading. I encourage all readers to adopt a different way of thinking when appropriate. The following message from a reader offers sound reasons for taking specif actions regarding the management of an iron condor position. My response explains why this specific reasoning is flawed (in my opinion).

The question

Hi Mark,

I have some questions on Chapter 3 (Rookie’s Guide to Options) Thought #3: “The Iron Condor is one position.”

You mentioned that the Iron Condor is one, and only one, position. The problem of thinking it as two credit spreads is that it often results in poor risk-management.

Using a similar example I (modified a little bit from the one in the book) traded one Iron Condor at $2.30 with 5 weeks to expiration:
– Sold one call spread at $1.20
– Sold one put spread at $1.10

Say, a few days later, the underlying index move higher, the Iron Condor position is at $2.50 (paper loss of $0.20):
– call spread at $2.00 (paper loss of $0.80)
– put spread at $0.50 (paper profit of $0.60)

I will lock in (i.e., buy to close) the put spread at $0.60 for the following reasons and conditions:
1. it is only a few days, the profit is more than 50% of the maximum possible profit
2. there are still 4 more weeks to expiration to gain the remaining less than 50% maximum possible profit. in fact, the remaining profit is less as I will always exit before expiration, typically at 80% of the maximum possible profit. so, there is only less than 30% of the maximum possible profit that I am risking for another 4 more weeks.
3. the hedging effect of put spread against the call spread is no longer as effective because the put spread is only at $0.50. as the underlying move higher, the call spread will gain value much faster than the put spread will loss value.

Is the above reasoning under those conditions ok? Will appreciate your view and sharing. Thank you.

My reply

Bottom line: The reasoning is OK. The principles that you follow for this example are sound.

However, the problem is that you are not seeing the bigger picture.

1. There is no paper loss on the call spread. Nor is there a paper profit on the put spread. There is only a 20-cent paper loss on the whole iron condor.

2. When trading any iron condor, the significant number is $2.30 – the entire premium collected. The price of the call and puts spreads are not relevant. In fact, these numbers should be ignored. It is not easy to convince traders of the validity of this statement, so let’s examine an example:

Assume that you enter a limit order to trade the iron condor at a cash credit of $2.30 or better. Next suppose that you cannot watch the markets for the next several hours. When you return home you note that your order was filled at $2.35 – five cents better than your limit (yes, this is possible). You also notice the following:

  • The market has declined by 1.5%.
  • Implied volatility has increased.
  • The iron condor is currently priced at $2.80.
  • Your order was filled: Call spread; $0.45; Put spread; Total credit is $2.35.

Obviously you are not happy with this situation because your iron condor is far from neutral and probably requires an adjustment. But that is beyond this today’s discussion — so let’s assume that you are not making any adjustments at the present time.

That leaves some questions

  • Do you manage this iron condor as one with a net credit of $2.35? [I hope so]
  • Do you prefer use to the trade-execution prices?

If you choose the “$2.35” iron condor, it is easy to understand that this is an out-of-balance position and may require an adjustment.

If you choose the “45-cent call spread and $1.90 put spread” then the market has not moved too far from your original trade prices, making it far less likely that any adjustment may be necessary.

In other words, it does not matter whether you collected $2.00, $1.50, $1.20, $1.00, or $0.80 for the put spread. All that matters is that you have an iron condor with a net credit of $2.35.

3. You should consider covering either the call spread, or the put spread, when the prices reaches a low level. You are correct in concluding that there is little hedge remaining when the price of one of the spreads is “low.” You are correct is deciding that it is not a good strategy to wait for a “long time” to collect the small remaining premium.

If you decide that $0.60 is the proper price at which to cover one of the short positions, then by all means, cover at that point. (I tend to wait for a lower price).

If you want to pay more to cover the “low-priced” portion of the iron condor when you get a chance to do so quickly, there is nothing wrong with that. However, do not assume that covering quickly is necessarily a good strategy because that leaves you with (in your example) a short call spread — and you no longer own an iron condor. If YOU are willing to do that by paying 60 cents, then so be it. It is always a sound decision to exit one part of the iron condor when you deem it to be a good risk-management decision. But, do not make this trade simply because it happened so quickly or that you expect the market to reverse direction. If you are suddenly bearish, there are much better plays for you to consider other than buying back the specific put spread that you sold earlier.

4. The differences in your alternatives are subtle and neither is “right’ nor ‘wrong.”

The main lesson here is developing the correct mindset because your way of thinking about each specific problem should be based on your collective experience as a trader.

Your actions above are reasonable. However, it is more effective for the market-neutral trader to own an iron condor than to be short a call or put spread.

You are doing the right thing by exiting one portion of the condor at some “low” price, and that price may differ from trade to trade. But deciding to cover when it reaches a specific percentage of the premium collected is not appropriate for managing iron condors.

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Iron Condors and Soaring Option Volume

(Reuters) – Growing concerns about the economy and markets sent volatility soaring on Wednesday [Oct 15, 2014] and pushed trading volume in the U.S. options market to its highest level in more than three years, as traders moved to hedge their portfolios on fear of further market gyrations.

You can read the whole article at the Reuters site.

Is it time for Iron Condors?

The increase in implied volatility suggests that investor complacency may have ended and that fear has returned.

The question for traders is whether it is time to adopt premium-selling strategies (the iron condor, for example), or if it is better to wait for even higher volatility. One thing is certain: getting into this game before the volatility highs have been reached is a treacherous undertaking. I recommend waiting because it is better to avoid iron-condor risk when we do not know whether the current period of increased volatility is just beginning.

My advice: If you are an experienced iron condor trader, it is okay to nibble, but I would not want more than 20% of my cash (the cash set aside for strategies such as the iron condor) in play at this time.

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Basic Iron Condor Lessons

I just published a few articles containing some basic iron condor lessons at The lessons are for newer iron condor traders. I plan to add to the series in the coming days.

Regular readers of this blog or my books will not find much in the way of new content because the linked articles are for very inexperienced option traders who want to learn something about trading iron condors.

For readers who are familiar with our typical posts,here is a link to one example of my more advanced thoughts about trading iron condors and managing risk.

Risk Graph for an Iron Condor Position


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Adjustment Woes

Hi Mark have been trading iron condors for awhile but always get burnt when time comes to adjust

Hello Kaye,

Adjustments prevent getting burned. So let me make a few observations:

    –If you wait too long and have already lost too much money by the time that you decide to adjust the position, then all the adjustment can do is help you not lose too much additional money. It is unlikely to produce a happy overall outcome. I understand that we don’t like the idea of adjusting too early because the market may reverse direction. However, there is a good compromise that depends on your comfort zone. I hope that you can discover that compromise. Consider adjusting in stages.

    –If it is the adjustment trade itself that produces the poor results, then there are alternate adjustment strategies. Rolling is not the only choice. And if you do roll, I urge you not to increase position size by more than a modest amount. It is okay to roll from 10 spreads to 12, but increasing size to 20-lots is just asking for trouble because some trades get rolled multiple times and positions can become var too large.

    –It is easy to get burned when you sell extra put spreads (on a market rally) or sell extra call spreads (on a decline). It the scheme of things, it is very important to prevent risk from escalating. Translation: If you must sell new put spreads on a rally, please cover the already existing put spreads — just in case we see a market just like the past week. The rising market reversed direction suddenly and made a bit move lower. There is not enough residual profit potential in that original put spread to risk leaving it uncovered. That is the reason it pays to cover when selling a newer spread.

    –If you are trading with a market-neutral bias, then the adjustment should return your position nearer to delta neutral than it was before the adjustment. In other words, when you do not have a market bias, try to avoid using the adjustment to recover lost money. Don’t suddenly decide to trade an iron condor that tries to take advantage of the current market trend. In general, iron condors are not suitable for traders with a market bias (unless it is a small bias).

    –If none of those situations apply, if you provide an example or two that describes what went wrong, I will try to provide some insight on your trade. Remember that every losing trade does not mean that the trader made any mistakes.

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New eBook: Iron Condors

I’m very pleased to announce that I just published my new eBook, Iron Condors.

Also available at iTunes, Barnes & Noble or your favorite bookseller.


This is not your ordinary “How to trade an option strategy” book. Read the full description below.

To celebrate the launch, I’m offering a special promotion to anyone on my e-mail list. If you are not already on the list, subscribe now and become eligible for the promotion.

So what’s the deal?

Buy either version of Iron Condors by Mark D Wolfinger and I’ll give you an eBook of your choice from the list below.
Offer expired 8/31/2014. Thank you to everyone who participated.

Here’s what to do

  1. Buy the eBook. No matter where you buy it, you will receive a receipt.
  2. Forward that receipt via e-mail to: books (at) mdwoptions (dot) com
  3. In the message, tell me which of the four eBooks (below) you prefer — and also the format: Kindle (.mobi) or ePub.
  4. I’ll send the eBook via e-mail


Book Description

Iron Condors is the third book in the “Best Option Strategies” series and each offers a hands-on education for some of the most useful option strategies. It is intended to be very different from all other books about iron condors.

Expect to learn the basic concepts of trading iron condors: (1) How to decide which options are suitable for your iron condor. Know in advance that there is seldom a single ‘best’ position that suits all traders; (2) Ideas — with specific examples — on how to manage risk; (3) Figuring out when to exit. We’ll discuss the pros and cons of locking in profits quickly (not a good idea) vs. holding longer (but not too long).

There is more that makes this book so special. It is not just a “how to” book because I share lessons learned from a lifetime of trading options (starting in 1977 when I became a CBOE market maker). I share my philosophy on iron condor trading and ideas on how a winning trader thinks. The goal is to offer guidance that allows you to develop good trade habits and an intelligent way of thinking about trading. We all learn as we gain experience, but some experience can be destructive when mindsets — that are dangerous to your longevity as a trader — become ingrained habits. This book helps traders avoid developing a difficult-to-break way of thinking.

This book was prepared for an audience that already understands the most basic concepts about options. Although some of the material is suitable for rookies. If you do not understand the difference between a put and call or have zero trading experience, I encourage you to begin with the most basic concepts about options before continuing. There are numerous sources of information, but I recommend my recently updated (2013) The Rookie’s Guide to Options, 2nd edition.

Another decision involves the pre-planned (I encourage preparation of a trade plan for each trade) exit when the target profit is achieved. If you have no profit target, then you will be hard pressed to exit when the trade continues to earn money. As profits accumulate, it becomes a daily decision: hold or exit. It is important to recognize when there is too little remaining profit potential for the prudent trader to hold. The trade plan helps with making good and timely decisions — and that makes you a more disciplined trader.

Closing the position could also be a gut-wrenching decision that locks in a loss and is made because it has become essential to take risk-reducing action. The book offers a solid introduction to risk management for iron condor traders.

The following points represent the foundation of my beliefs, and the book is written accordingly: (1)The ability to manage risk is the most important skill for any trader; (2) Take time to learn about the Greeks. It is not difficult, and it allows you to recognize the risk (and reward) potential for any position; (3) Discipline is necessary when managing risk. It is one thing to say that you understand what risk management is all about, but it is another to put it into practice; (4) Let another trader earn the last nickel or dime on the call and put spreads that comprise the iron condor. Pay a small sum to exit, lock in profits, and eliminate all risk.

The iron condor is most often traded as a single transaction, consisting of four legs. However, it is managed as if it were two positions. This is not a contradiction. This mindset is covered in detail.

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Iron Condor Question

From a reader

Consider following 2 Iron Condors:

Sell X index march 6600 Call
Buy X index march 6700 Call
Sell X index march 5800 Put
Buy X index march 5700 Put

Sell X index march 6600 Call
Buy X index march 6800 Call
Sell X index march 5800 Put
Buy X index march 5600 Put

Underlying:6200 for both.
Lot size 50

**(see below) Maximum risk: $5,000 for trade-1: $10,000 for trade-2

** Premium collected: Approximately $1,700 ($5,000/3) in trade-1 & slightly less than $3,300 ($10,000/3) in trade-2.

Considering only the trades allowed to expire, it requires 2 winning trades for each lost trade with either iron condor. But earnings potential in trade-2 is almost double.

Considering overall risk factors which trade is preferred & why?

Excellent questions because it is common to think about a pair of similar-looking iron condors in this manner. And the truly important question is how does a trader decide which of the two spreads better suits his or her needs.

The first iron condor has strikes that are 100 points apart and the second uses strikes twice as far apart. Even though the widths in this example are extreme, the principles that I want to discuss remain relevant.

** But first:

    –The spreads are 100 points wide (not 1 point) and the risk per spread is $10,000, not $100.

    –Thus, 50-lots of the first spread is a humongous position with a risk of nearly $500,000. The second, wider iron condor, places $1,000,000 (less the premium collected) at risk.

    –Instead of collecting $1,700 (and $3,300) the true premium collected would be $170,000 and $333,000.

We can discuss the relative merits of the two iron condors, using your numbers for the cash premium and risk. We do that by changing the index price to $62 from $6,200.

Comparing the 2-point iron condor with the 1-point iron condor

When examining the wider spread, or the 56/58 put spread or the 66/68 call spread, the first thing to understand is that selling these spreads is exactly equivalent to selling each of the more narrow spreads contained within. For example:

    Buy 56 put; sell 57 put coupled with
    Buy 57 put; sell 58 put

    gives you the same position as

    Buy 56 put; sell 58 put.

We prefer to sell the 56/58 put directly because it involves only one trade instead of two. That not only saves cash on commissions, but it also is more efficient to make the trade. Remember that every time we place an order, we must face slippage, or the cost of buying an option at a price that is nearer to the asking price than the bid price; plus the cost of selling an option at a price that is nearer the bid than the ask. This cannot be avoided and is the cost of doing business. But we can be smart about it and when we want to sell the 56/58 put spread, we enter an order to do exactly that. We never sell the 56/57 spread and follow that trade by selling the 57/58 spread.

Trade size: Profit potential vs. risk

Yes, the profit potential of the second spread is almost double that for the first spread.

However, it is mandatory to understand why that is true. First the potential loss is twice as large and we should not be surprised that more risky positions provide for the opportunity to both earn a larger profit or incur a larger loss.

Second, the first trade is truly 50-lots of a 1-point iron condor whereas the second trade is truly 50-lots of EACH of two different one-point iron condors, or 100- lots total.

Thus, there is neither an advantage nor a disadvantage to trading the wider spread.
But, if you choose the wider, then it is essential to trade only one-half as many contracts (25-lot) when the iron condors are twice as wide. That is how we manage risk. We must not fall into the trap of believing that 50 spreads is the same as 50 different spreads. We should chose the size of our individual trades based on keeping risk at nearly equal levels. Thus, 50-lots of the 1-point IC is very nearly the same as trading 25-lots of the 2-point iron condor.

So, how do we decide between trade-1 and trade-2?

Once you understand that the trade consists of 50 one-point iron condors, then the decision becomes relatively simple.

Look at the 57/58 and the 56/57 put spreads. Which one is more appealing? The former provides a larger premium, and that is attractive when selling the spread. However, the options are also closer-to-the money, and that means there is an increased probability of incurring a loss on the trade.

The bottom line becomes: Do you feel more comfortable with the higher probability of losing money coupled with the higher reward when the trade works as hoped? Or do you prefer a bit less premium in return for a slightly greater chance of earning some profit from the trade? that is the choice and that is how you should go about deciding which trade to make.

If you like the 57/58P spread better, then trade a one-point iron condor. Go ahead and compare the two call spreads with each other and chose the one that you prefer to sell. Trade either of these iron condors: 57/58P//66/67C; or 5758P//67/78C.

If you prefer the 56/57P spread, then trade a one-point iron condor that includes that put spread and one of the call spreads: 56/57P//67/68C; or 56/57P//66/67C.

When you cannot decide; when either of these iron condors appeals to you, that is the time to trade half as many of each, or 25-lots of the two-point iron condor: 56/58P//66/68C.

Longer-term break even

It is not correct to look at the long-term situation as winning trades will always earn the maximum amount (the $1,700 credit) and that losing trades will always lose the maximum amount ($3,300) because

    –Sometimes the underlying is between the strikes (i.e., 56.25) when expiration arrives and the loss is less than the max. This does not happen often.

    –The prudent iron condor trader actively manages risk and does not allow his fate to be determined by luck. It is seldom a good idea to hold these positions until expiration arrives. Part of the time we take a large, but less than maximum profit early. At other times, we take a loss early, as a defensive measure when the risk of holding becomes too high.

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Iron Condor Subtleties

Ben had some questions and background information:

Hi Mark,
I actively traded iron condors since May. I have been trying fair high probability condors (4:1 risk to reward) on NDX, SPY, QQQ, VOD & AMZN, with expiry dates ranging from July to October.

I thought things had been going reasonably well but struggle to reconcile the ‘performance’ summary on the CBOE paper trading account to my account value. I spent the evening exporting all of this data to excel and preparing my own spreadsheet and it turns out I have made a small loss of around $1,000 so far. This isn’t a huge surprise as i have had to roll a few condors and experimented with kite spreads and call spreads as adjustments when the short strike has started to be approached. In particular I have had quite a ride with AMZN, i’ve rolled the call spreads twice.

Today I have closed my NDX and QQQ (yet to be filled) positions as NDX is a July expiry and though QQQ is an august expiry, gamma is getting too high and I had made around 70% of the possible profit. Why be greedy when gamma could blow it all away quickly.

I have rambled on long enough, consider up to this point to be just background information please and I will get on to my questions now.

1) I think I have spent a lot on commissions and fees (around $2,000 so far) and for my SPY and QQQ. It’s cost me about 10% of the opening credit to open the positions. I understand that this is due to the high number of contracts traded, 100 and 200 respectively, coupled with the relative ‘cheapness’ of the options sold, $19 per SPY contract and $20 per QQQ contract. The longs and shorts of both if not all of my positions are one strike apart (SPY Aug puts 146/147 calls 172/173, QQQ Aug puts 64/65 calls 78/79). Is there anything I can do to reduce the relative value of commissions and fees?

I know that I could increase the distance between my longs and shorts to say 2 strikes but this is not wise as its effectively selling all the spreads in between the long and shorts, i.e., i’d be selling the 78/79 call spread and the 79/80 spread if i widened my QQQ calls to 78/80 in future condors. For this reason it doesn’t appeal as a solution.

Alternatively I could be open lower probability (therefore higher priced) positions, this would reduce the number of contracts I trade and commissions would reduce relatively. I don’t like this solution much either as am already making enough adjustments as strikes are coming under threat with my high probability approach. I may experiment with this in the future but for now im happy with the higher probability/lower reward condors.

Perhaps there are other indices I could trade which are more expensive?

You may well point out that i’m not trading any RUT options despite these being a favourite of yours. This leads onto my next question, which may actually be better directed straight to the CBOE website…

2) I can find option quotes for RUT on the CBOE paper trading account but it doesn’t seem to work. The website does not give a quote for RUT itself and as a result the platform does not give any probabilities, R/R or greeks for any RUT options. In fact im yet to even have a fill on any RUT orders. This is surprising as I though RUT was solely listed on the CBOE exchange. I could open a paper trading account at another website but im loathe to lose all of the data and history i’ve built up so far. What do you suggest I do here please?

3) I’ve experimented with single equity options (such as AMZN and VOD) as per my introduction. Though the premiums collected are juicy they are certainly the condors that have required the most attention and adjusting. This is probably the reason premiums are so good, single equities are more volatile, even the mega-caps. Are there any European style, cash settled, liquid ETFs which i can trade options on or are all ETFs equity settled American style by definition?

4) The least important of all my questions and one you can feel free to avoid completely but I thought i’d ask anyway. Much further down the line, if I can prove myself to be profitable and a good risk manager I may start trading small with real money. I’m a UK citizen and resident but the American options environment is just better. It’s more liquid, there is greater choice of underlyings and importantly much more competitive brokers. Do you know if a UK citizen can open an account with an American broker and trade your options?

This post has gone on far too long and if you have made it this far I thank you. Any input you can give which you feel would be useful will be greatly appreciated. If you have any questions for me or need any further information please let me know. I could provide the spreadsheet if wanted.

Thanks again


Hello Ben.

1) Commissions should not be uppermost in your thoughts, but giving up 10% of the premium is far too much.


    — First, call your broker and ask about commissions. If they will not offer a better rate, look for another broker. But even better, following the two suggestions below may reduce commissions by 90%.

    — Instead of trading 100 one-point SPY spreads, trade 10 SPX 10-point spreads. Bonus: No dividends and no early exercise.

    — Instead of trading 100 one-point QQQ spreads, think about trading four 25-point NDX spreads.

Comments: Size is not determined by the number of contracts. To trade iron condor positions of equal size, the margin requirements should be the same.

    — I hope you are not trading 100-,lots of Amazon. If using 10-point spreads, 10 spreads is the correct trade size. If using 5-point spreads, then 20-lots is the right size.

    — I hope you are not trading 100-lots of NDX. Just 4 of the 25-point spreads is equivalent to 100 QQQ one-point spreads.

2) RUT has become a strange beast. To get market data requires payment of a small monthly fee. If your broker cannot supply the data at no cost to you, then you can do without trading RUT for now. If and when you begin to trade with real money, and after you know that you are making money with the iron condor strategy, that is the time to think about adding RUT to your group of underlying assets.

I don’t know why you have no fills, but if you want to test the system, you can always trade ONE LOT of a 5-point iron condor by sending in a market order. NOTE: This is only a test and should never be done with real money. But with a paper-trading account, you can send in the order and see just how bad the fill price is.

I know you want to keep all data collected to date. However, at some point you can declare stage one to be finished and begin stage two. That should be done with a clean slate and therefore it is okay to move to a new web site to trade.

Keep the numbers from stage one, but it is acceptable to separate the next stage in your trading career from the first stage.

3) Single equities tend to be more volatile than a group of stocks, such as an index. But that is only true for higher volatility stocks. Unless you develop a special affinity for trading specific stocks, I recommend index or ETFs – but only because diversification means less volatility and no chance that bad news will destroy an entire index as it can a single stock.

I don’t know about ‘by definition’ but ETFs are American style and settle in shares. I suppose cash settled ETFs may exist and will exist, but I do not know of any.

I found this quote online, but do not know the date of whether these puppies were ever created: “The International Securities Exchange is planning to offer cash-settled, European-style options on certain exchange-traded funds and equity securities.” Write to the ISE and ask.

4) I do not know about UK citizens, but people in Australia and parts of Europe do have accounts with American brokers and they do trade US markets. Try to fill out an application at and see whether you are allowed to complete the application. Or send e-mail to several large brokers and ask.

***DO not forget to ask if there are any restrictions for non US citizens.

— Locking in profits by exiting early is a sound idea. Nothing wrong with taking 70% of the maximum

— Negative gamma can produce lots of heartache. Nothing wrong with conservatively exiting positions when negative gamma begins to feel uncomfortable.

— It is always a reasonable decision to take a loss and exit. My advice is to roll only when you really want to own the new position. It is would already make you uncomfortable as soon as the roll is made, then do not roll. Take the loss and move on.

— Unless you make a habit of owning positions into expiration, then do not roll when time to expiration is short. That ‘short’ time is impossible to define because it depends on the expiration time of the original trade. If you trade 45 to 60-dat iron condors, then I encourage you not to roll when less than 3-weeks remain to expiration.

Good questions and I wish you well.

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