New Iron Condor Trades

As I feared, buying iron condors (selling a call spread and selling a put spread) is much more difficult today than it was a few weeks ago, when the markets were more volatile.

It's not just that the prices are lower.  That's to be expected.  But I no longer can sell spreads just a nickel or dime below the mid-points of the bid/ask spreads.  Market makers are simply less anxious to buy out of the money spreads than they were.  And who can blame them?  I understand that reluctance.

Because I'm not in the market timing game, I'm going to buy  a small number of RUT Feb and March iron condors today, and hope to buy a few more tomorrow.  I'm not yet prepared to buy as many as a did a few months ago – even with the protection of owning extra strangles – because reduced size is the simplest method for minimizing risk.

Dear readers:  How have you found these markets?  Are you able to open new positions at decent prices, or are you having difficulty?

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3 Responses to New Iron Condor Trades

  1. Russ Abbott 12/23/2008 at 2:53 PM #

    Hi Mark,
    I have a couple of questions for you.
    First of all, I’m having a hard time buying iron condors. When I want to buy one, I put in an order with a minimum net credit, but it rarely gets executed. I imagine that since I’m dealing with 4 options, it will be the rare instance when the spreads are sufficiently close to make my desired price. But if one orders an iron condor at the market, I would expect that one would get killed by the spreads and the market makers. Yet you talk about buying them all the time. What’s the secret? Do you just ask for a smaller price?
    My second question concerns your willingness to discuss actual trades on this blog. You said that you are planning to buy some RUT Feb and March iron condors. But you didn’t say which ones. I suppose that if you announced it in advance, you would give up too much, both in terms of others competing with you and in terms of market makers taking advantage of knowing your plans. But what about discussing positions after you take them — along with a rationale for the positions?
    Also, how would you feel about discussing trades that your readers suggest? For example, if I say that I’m considering trade X (or that I took position X), would you be willing to comment on it? It would have to be understood that your comments are not to be taken as investment advice but simply as an academic exercise.
    If you would be willing to do either of the preceding, it would then be interesting to follow those trades and see how they do and whether the rationale holds up.
    — Russ

  2. MrGreen 12/28/2008 at 1:35 PM #

    Mark, I’m an active IC trader with an adjustment strategy that opens up my IC when the market moves toward it. I’ve found that the opening of IC’s is a bit tricky lately and it often pays to watch them carefully or enter GTC orders at favorable price because the midpoints change more intraday than a person might expect given that the overall market movement has been relatively small recently. I think it is also wise to slowly enter a position rather than all at once. For example, if you want to have 20 contracts in the RUT, I would go in about 3-5 at a time over a few days until I’m in, I also like to have a lot of extra margin, too, so I can move things around. I’m being slowly won over to the longer term style of IC investment (in the position 2-3 months from expiry and out whenever I can sell for 0.20 or 0.25 cents– but always more than two weeks from expiry). If things are looking Ok with two weeks left, they will also be just fine if I roll out a couple of months!! It is a little easier to adjust these positions, and the gamma is way more manageable. What has been your experience?

  3. Mark Wolfinger 12/28/2008 at 4:33 PM #

    I’m turning this question into a post (Monday morning).