IRON CONDOR EXAMPLE FULL

However, as your initial gain was Rs 80, your total loss narrows to Rs 420. Since the lot size is Rs 100, the total loss becomes Rs 500. Here, you will incur a loss of Rs 5 (Rs 20-25).

The Sell Call Option will not expire worthless as it gives you the right to buy at Rs 35 instead of Rs 20.

The Sell Put Option will not expire worthless as it gives you the right to sell at Rs 25 instead of Rs 20.

Buy Call Option will expire worthless since it gives you the right to buy at Rs 40 instead of Rs 20.

Buy Put Option will expire worthless as it gives you the right to sell at Rs 20 which is the same as the market price).Let’s say at the end of the expiry, the price of the stock is Rs 20 on expiry. Scenario 2: The stock price is below Rs 25 or higher than Rs 35.

However, to understand the iron condor's meaning, you need to know the types of options and terms related to the Iron Condor options strategy. One of the most widely used is the Iron Condor options strategy. In Options Trading, the profit potential is high due to the effective trading strategies that are based on tried and true processes used by Options traders. Similarly, selling Options will reduce your losses if the security price goes down, which is also known as hedging.

IRON CONDOR EXAMPLE FULL

This is because you do not have to pay the full premium for the issuance of an options contract. Options can be acquired with brokers through online trading accounts as with any other asset group.Īlthough it's a little more complex than stock trading, Options yield comparatively better profits if the security price increases. Options are contracts that grant the holder the right but do not bind them, to either buy or sell a sum of some underlying asset at or before the contract expires at a fixed price. The same goes with Options trading and its numerous complex strategies. What is Dematerialization & It's ProcessĪ common belief in the Indian financial market is: the more complex the strategy, the higher is the potential for profits.Difference Between Demat and Trading Account.Documents Required to Open a Demat Account.Aims, Objectives and Importance of Demat Account.What is the Sub-broker Program of IIFL?.Any readers interested in this strategy should do their own research and seek advice from a licensed financial adviser. The strategy presented would not be suitable for investors who are not familiar with exchange traded options. Although as we know, past performance doesn’t guarantee future performance.ĭisclaimer: The information above is for educational purposes only and should not be treated as investment advice. AMD has stayed within the expected range following five of the six recent earnings releases. Trades held over earnings allow little room for adjusting, so they can be a bit hit or miss. However, if AMD stock makes a bigger than expected move, the trade will suffer losses. If price action stabilizes, then iron condors will work well. Therefore, if we take the premium ($90) divided by the maximum risk ($410), this iron condor trade has the potential to return 21.95%. This can be calculated by taking the short strikes and adding or subtracting the premium received.Īs both spreads are $5 wide, the maximum risk in the trade is 5 – 0.90 x 100 = $410. The profit zone ranges between 73.10 and 100.90. In total, the iron condor will generate around $0.90 per contract or $90 of premium. This spread could be sold on Friday for around $0.35. Then the bear call spread, which could be placed by selling the 100 call and buying the 105 call. That spread could be sold on Friday for around $0.55. Using the May 6 expiry, we could sell the 74 put and buy the 69 put. The idea with the trade is to profit from time decay while expecting that the stock will not move too much in either direction.įirst, we take the bull put spread. Let’s look at an example of how we might set up an iron condor over earnings.Īs a reminder, an iron condor is a combination of a bull put spread and a bear call spread. Traders that think AMD stock will not move too much following this earnings report, could look at an iron condor earnings trade. In part, that is because the company is due to report earnings after the closing bell on Tuesday, and we typically see elevated implied volatility around that event. That means that the current level of implied volatility is higher than 98% of all other readings in the past twelve months. AMD (AMD) is showing elevated implied volatility with an IV Percentile reading of 98%.

Iron condor example