Put a floor under the short strangle and the worst case becomes a number. This lesson shows why a capped loss is still not a small one.
After this lesson you can
- Work out an iron condor's credit, both breakevens and its worst case before you enter
- See it as a bull put spread and a bear call spread with the same expiration
- Weigh wider wings against a bigger worst case, and know what the iron butterfly changes
- Take profits early, size by the worst case, and close before expiration
- Read the odds and the ratio honestly, including what happens when the stock runs
Chapters
- 0:00A floor under the strangle
- 1:23Two credit spreads
- 2:36What it pays at expiration
- 4:02The odds and the ratio
- 5:20Choosing the strikes
- 7:08When Acme runs
- 8:28Time and volatility
- 9:41Managing an iron condor
- 11:05Five mistakes
- 12:05The whole lesson on one screen
Practice in the game: Level 7 · Iron Vest