Weekly Options Iron Condor

iron condor chart

Weekly options iron condor trade is a type of options trade strategy that combines a put credit spread with a call credit spread. This is a popular strategy for monthly index options or with non-trending stock as you don’t want to enter iron condors on volatile stocks.

Weekly options credit spread trade is the most common 2-legged option trade strategy and usually is made as a bet on a specific direction of the stock. With a iron condor you’re goal is for the stock or index to stay in a range so that you can collect to premiums from the 2 credits.

For example, if XYZ stock has been bouncing around in a range then you could sell at bear call credit spread near resistance of the range and sell a bull put credit spread near support of the range. The combination of the two credit spreads creates an Iron Condor trade.

The benefit of using weekly options with Iron Condor strategy is the fast time decay of weekly options.

From the chart below you can see chart a typical Iron Condor chart. The red line is representative of max profit at expiration. The curved white line represents the current profit/loss relative to the white horizontal zero line. The curved white line moves up each day as the out of the money sold options decay in price each day.

The “profit tent” is the range between the two red corners in the chart so if the stock can stay within that range then the trade will turn out profitable.

The two price points where the red lines cross the horizontal white line are the breakeven points that if the stock moves beyond those two points will start becoming unprofitable.

Weekly Options Iron Condor Chart

Weekly Options Iron condor

You can see why you wouldn’t want to enter a volatile stock with a weekly options iron condor because the stock can quickly move out of the profitable range and with the short time to expiration that weeklys have you don’t have the ability to adjust the trade.

Weekly Options Iron Condor Risks

The risks with an iron condor strategy is that the stock can move out of the desired range and cause a need to adjust the trade with the hope that the stock will move back into the profit range.

The risk with weekly options is that since they have a short time to expiration which makes it hard to find strike prices much beyond the current market price that have decent time value priced in. This therefore causes you to have use a narrow range for weekly options iron condor.

Image Wikipedia

For a good course on trading Iron Condors and spreads with weekly options, Click here to read my review

–> Visit our comprehensive Weekly Options trading post

3 thoughts on “Weekly Options Iron Condor”

  1. everybody with a condor message talks about adjustments but no wants to tell how-unless one is willing to sign up for
    $$$ advise—any helpful sites willing to reveal adjustment methods as public service?

    1. Brian-KineticTrader

      Hi Brad,
      for Weekly options you should trade off technical analysis rather than on the greeks because for decent credit on weekly credit spread you are selling pretty close to the current price.

      The common adjustments for iron condors are:
      1. If price moves a lot and close to your short strike then Close out short strike on the credit spread going against you and let the long call appreciate. If stock keeps moving you can add more long calls.

      2. You can buy a butterfly spread where the long strike closes out your short strike…..For example….if you short spread in the Iron condor is 90/95call credit spread then you would buy a 90/100/110 butterfly so that the long short 90 strike is closed out.

      3. Have a predefined risk/reward so you automatically close out the position once the loss reaches a specific level

      For longer term weekly options you be more methodical like Dan Sheridan’s approach where he sell very high probability credit spreads and closes them our well before expiration.

      Here is an example of Dan’s criteria for high probability Iron condor(short strikes 2standard deviations out). He mostly does Index spreads
      • Initiate 5-7 weeks out(Ideal 49days before Expir). Exit 1-2 weeks prior expiration
      • Short Call delta between 7-9 (adjust if delta hits 25)
      • Short Put delta between 7-9 (adjust if delta hits 20)
      • 1-5pt strike width for each spread
      • Good trade for RUT
      • Sell into market rallies
      • Don’t leg into it — put the whole thing on at once
      • Risk/Reward: Lower risk, so lower reward — but higher probability of success
      • Sell when trade is @ 70% of maximum profit
      • Close each leg spread when 20cent or less

  2. could you explain your sample trade step below:
    Short Call delta between 7-9 (adjust if delta hits 25)
    Short Put delta between 7-9 (adjust if delta hits 20)
    what do you mean by delta between 7-9 or hits 25 or 20
    thanks
    kam

Leave a Comment

Your email address will not be published.