{"id":5829,"date":"2016-05-20T12:51:44","date_gmt":"2016-05-20T16:51:44","guid":{"rendered":"https:\/\/trades.iwopremium.com\/?page_id=5829"},"modified":"2017-11-16T11:40:49","modified_gmt":"2017-11-16T15:40:49","slug":"iron-condor-trading-framework","status":"publish","type":"page","link":"https:\/\/trades.iwopremium.com\/iron-condor-trading-framework\/","title":{"rendered":"Iron Condor Trading Framework"},"content":{"rendered":"<p><img decoding=\"async\" loading=\"lazy\" class=\"aligncenter size-full wp-image-4923\" src=\"https:\/\/trades.iwopremium.com\/wp-content\/uploads\/2016\/03\/il-temp.jpg\" alt=\"il-temp\" width=\"300\" height=\"123\" \/><\/p>\n<p>[i4w_onlyfor tagid=&#8217;529&#8242;]<\/p>\n<p><center><\/p>\n<div id=\"evp-ae894af26eecc2e1bded2f41f0e01cd1-wrap\" class=\"evp-video-wrap\"><\/div>\n<p><script type=\"text\/javascript\" src=\"http:\/\/iwovideo.com\/framework.php?div_id=evp-ae894af26eecc2e1bded2f41f0e01cd1&#038;id=aWMwYm9vdGNhbXAtb2N0MTctMS5tcDQ%3D&#038;v=1510846840&#038;profile=default\"><\/script><script type=\"text\/javascript\"><!--\n_evpInit('aWMwYm9vdGNhbXAtb2N0MTctMS5tcDQ=[evp-ae894af26eecc2e1bded2f41f0e01cd1]');\/\/--><\/script><\/p>\n<p><\/center><br \/>\n[ELSE_onlyfor]<\/p>\n<div class=\"content-box-blue\"><strong>All of this is covered in the Iron Condor Bootcamp, a 60 minute course that dives into this framework into detail. <a href=\"https:\/\/mr105.infusionsoft.com\/app\/orderForms\/IC-Bootcamp?_ga=1.264934344.65994717.1463768506\">Click here to order the training.<\/a><\/strong><\/div>\n<p>[\/i4w_onlyfor]<\/p>\n<p>Here is the overall structure of how we trade Iron Condors at IncomeLab:<\/p>\n<h2>Step 1: Entering the Trade<\/h2>\n<p><strong>Asset Selection:<\/strong> SPX, NDX, or RUT. We focus primarily on the SPX.<\/p>\n<p><strong>Target Return on Risk:<\/strong> 9% on each side, so 18% total<\/p>\n<p><strong>Strikes:<\/strong> 10 Wide. For example, 1980\/1970 put spread.<\/p>\n<p><strong>Starting Short Delta:<\/strong> Around 10 delta. If you focus on the Return on Risk then the option delta will work out.<\/p>\n<p><strong>Target Net Credit:<\/strong> On a 10 wide iron condor, you&#8217;re looking for 1.80<\/p>\n<h2>Step 2: Adjusting the Trade<\/h2>\n<p><strong>Scaling Out Each Side<\/strong>: If a spread value is under .30 then close and open a new spread closer to the price of the underlying market. This is known as legging out and rolling.<\/p>\n<p><strong>Hedging<\/strong>: If either short option in your iron condor has a delta of 20, then buy options to reduce NET delta by 50%.<\/p>\n<p>So, for example, if you have a 1790\/1800 2030\/2040 iron condor, if either the 1800 or 2030 option has a delta of 20, it&#8217;s time to adjust.<\/p>\n<p>This is ideally\u00a0done with a delta between 15-8 delta, 45 days out. This is the &#8220;trickiest&#8221; part of the framework because it will vary depending on your position size.<\/p>\n<p>The exact strike is not as important as reducing your NET delta by 50%.<\/p>\n<p>If you have smaller size, use index ETF options to hedge:<\/p>\n<p>SPX -&gt; SPY<\/p>\n<p>RUT -&gt; IWM<\/p>\n<p>NDX -&gt; QQQ<\/p>\n<p><strong>Closing out Hedges:<\/strong> If the market continues to move against you, close out the long option hedge and use the profits to roll the losing side out.<\/p>\n<p>For example, say the market rallies hard. You buy a call to hedge. Then the market goes even higher. You would:<\/p>\n<ol>\n<li>Close out the call hedge for profits<\/li>\n<li>Roll the call spread higher<\/li>\n<li>Roll the put spread higher<\/li>\n<\/ol>\n<p>The opposite is done in a market selloff. You would buy puts, and if the market sells off more you would:<\/p>\n<ol>\n<li>Close out the put hedge for profits<\/li>\n<li>Roll the put spread lower<\/li>\n<li>Roll the call spread lower<\/li>\n<\/ol>\n<p>Here is the flow for both scenarios:<\/p>\n<p><a href=\"https:\/\/trades.iwopremium.com\/wp-content\/uploads\/2016\/05\/ic-rally.png\"><img decoding=\"async\" loading=\"lazy\" class=\"aligncenter size-full wp-image-5835\" src=\"https:\/\/trades.iwopremium.com\/wp-content\/uploads\/2016\/05\/ic-rally.png\" alt=\"ic-rally\" width=\"883\" height=\"500\" srcset=\"https:\/\/trades.iwopremium.com\/wp-content\/uploads\/2016\/05\/ic-rally.png 883w, https:\/\/trades.iwopremium.com\/wp-content\/uploads\/2016\/05\/ic-rally-300x170.png 300w, https:\/\/trades.iwopremium.com\/wp-content\/uploads\/2016\/05\/ic-rally-128x72.png 128w\" sizes=\"(max-width: 883px) 100vw, 883px\" \/><\/a><\/p>\n<p><a href=\"https:\/\/trades.iwopremium.com\/wp-content\/uploads\/2016\/05\/ic-selloff.png\"><img decoding=\"async\" loading=\"lazy\" class=\"aligncenter size-full wp-image-5836\" src=\"https:\/\/trades.iwopremium.com\/wp-content\/uploads\/2016\/05\/ic-selloff.png\" alt=\"ic-selloff\" width=\"881\" height=\"494\" srcset=\"https:\/\/trades.iwopremium.com\/wp-content\/uploads\/2016\/05\/ic-selloff.png 881w, https:\/\/trades.iwopremium.com\/wp-content\/uploads\/2016\/05\/ic-selloff-300x168.png 300w, https:\/\/trades.iwopremium.com\/wp-content\/uploads\/2016\/05\/ic-selloff-128x72.png 128w\" sizes=\"(max-width: 881px) 100vw, 881px\" \/><\/a><\/p>\n<h2>Step 3: Exiting The Trade<\/h2>\n<p>The picture below is a good guideline of what to look for in terms of profits relative to time in trade:<\/p>\n<p><img decoding=\"async\" loading=\"lazy\" class=\"aligncenter size-full wp-image-5832\" src=\"https:\/\/trades.iwopremium.com\/wp-content\/uploads\/2016\/05\/exit.png\" alt=\"exit\" width=\"808\" height=\"392\" srcset=\"https:\/\/trades.iwopremium.com\/wp-content\/uploads\/2016\/05\/exit.png 808w, https:\/\/trades.iwopremium.com\/wp-content\/uploads\/2016\/05\/exit-300x146.png 300w\" sizes=\"(max-width: 808px) 100vw, 808px\" \/><\/p>\n<p>The sweet spot is at 30 days to expiration.<\/p>\n<p>If you can capture 50% of maximum credit with 30 days left to expiration, that&#8217;s a good exit.<\/p>\n<p>If you can capture 20% of maximum credit after being in the trade for only 10 days, that&#8217;s also a good exit.<\/p>\n<p>The goal here is to maximize returns and mimizing time in the market.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>[i4w_onlyfor tagid=&#8217;529&#8242;] [ELSE_onlyfor] All of this is covered in the Iron Condor Bootcamp, a 60 minute course that dives into this framework into detail. Click here to order the training. [\/i4w_onlyfor] Here is the overall structure of how we trade Iron Condors at IncomeLab: Step 1: Entering the Trade Asset Selection: SPX, NDX, or RUT. [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"_bbp_topic_count":0,"_bbp_reply_count":0,"_bbp_total_topic_count":0,"_bbp_total_reply_count":0,"_bbp_voice_count":0,"_bbp_anonymous_reply_count":0,"_bbp_topic_count_hidden":0,"_bbp_reply_count_hidden":0,"_bbp_forum_subforum_count":0,"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"full-width-content"},"_links":{"self":[{"href":"https:\/\/trades.iwopremium.com\/wp-json\/wp\/v2\/pages\/5829"}],"collection":[{"href":"https:\/\/trades.iwopremium.com\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/trades.iwopremium.com\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/trades.iwopremium.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/trades.iwopremium.com\/wp-json\/wp\/v2\/comments?post=5829"}],"version-history":[{"count":12,"href":"https:\/\/trades.iwopremium.com\/wp-json\/wp\/v2\/pages\/5829\/revisions"}],"predecessor-version":[{"id":9044,"href":"https:\/\/trades.iwopremium.com\/wp-json\/wp\/v2\/pages\/5829\/revisions\/9044"}],"wp:attachment":[{"href":"https:\/\/trades.iwopremium.com\/wp-json\/wp\/v2\/media?parent=5829"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}