From a reader:
I'm not following why you are aiming
for a specific profit target on this trade. I think it would be more
educational to follow a trade that reflects how you actually go about deciding
how to close out a trade.
is an experiment.
I've always managed my iron condor portfolio on the basis of its
current risk and reward. I hold positions when the prospects for making money
from today forward are attractive (compared with the risk involved); and I
close or adjust when I feel risk has reached a point that moves me out of my
Why the experiment?
Holding positions into expiration is
both extra rewarding – due to more rapid time decay – and extra risky – due to the
explosive nature of negative gamma as expiration approaches. (Money is lost
more rapidly when the short option moves into the money).
As an experiment, I want to consider opening a 5-week iron condor
position, hoping to close it in two weeks (maybe 2-3 days longer) – if and when
a specified profit is reached. I believe
this is NOT as efficient as making decisions on a day to day basis, but in
return for that lack of efficiency, I would have no position during the last
two weeks prior to expiration. That benefit is worth a great deal to me because
risk minimization is my primary goal.
Many traders prefer to own
positions as expiration nears. That’s
why I want my readers to find their individual comfort zones when trading
I cannot decide if aiming for a specific target profit is a winning way to
trade iron condors. For now, it's a small portion of my portfolio – and I'll see
how it goes before deciding whether to add this strategy to my
arsenal of methods.
I appreciate that you believe posting a different type of real
trade – one that I manage according to my current methods – would be more
educational. The reason I haven't done
that is because when beginners see someone's trade online, they often blindly
copy that trade.
I don't believe that’s a good idea because the trade I initiate
suits my profit objective, my risk guidelines, and my
comfort zone. I prefer to encourage readers to find trades that suit their
individual comfort zones.
But your idea has merit. I'll look for a real world iron condor
position that I am considering closing – and discuss the reasons for closing in a future blog.