How Does Iron Condor Strategy Work?

The world of trading is quite exciting and eventful. Every moment, the stock trading market has something for the traders. If you are investing in trade market without following backtested trading strategies, the probability of making a significant profit is quite low.

One such backtested trading strategy used by the professional traders is iron condor strategy. This is a limited risk trading strategy used by the professional traders to make consistent profits. Iron condor strategy is designed to make limited profits with high probability.

Image result for professional trading

Iron condor strategy is the best option strategy used by the professional managers and individual investors to make small profits with limited risks of losing money. So what are the features of an iron condor strategy and how does it work? Let’s have a look at it.

Iron condor strategy includes four different contracts. All the four options are out-of-the-money options. In this strategy, iron condor spread is created by selling one out-of-the-money call spread and one out-of-the-money put spread on the same expiration date and on the same underlying instrument.

Image result for business consultant

Iron condor strategy is basically a mix of the bull put spread and bear call spread. This strategy is effective only if you want to invest in the stock market with a neutral bias. Many investors are quite comfortable in following iron condor strategy because of the high probability of success it offers.

When you sell the call and put spread, you own an iron condor and hope that underlying security remains in a relatively narrow trading range until the option expires.

Related image

It is a little difficult for the self-directed investors to perfectly execute the iron condor strategy. But if you want to make profits on a regular basis you can learn the iron condor strategy from the professional traders and then execute it. You can also browse this website to know more about the iron condor strategy.