Iron Condor Strategy Review

The iron condor strategy is one of the most popular options spreads of all time.  There are many courses, books and people teaching this strategy online or at live seminars.  There’s even Meetup groups about this option strategy.  Why is the iron condor strategy so famous?  I have my theories…

The Famous Iron Condor

IMO the reason the iron condor strategy is so well-known is because market makers and brokers have spent the time and money to advertise this spread to the public.  Why would they do this?  Well, the iron condor makes a lot of money – for the the brokers and market makers.  This options strategy requires a large number of contracts since it’s constructed with 4 legs.  It also requires weekly adjustments, often times daily, because it’s so risky and it forces the user to constantly make trades in order not to experience a large loss.

Popular Ways to Trade the Iron Condor

Popular courses that teach this method, not SJ Options of course, use a standard OTM formula that is normally configured around deltas of 10 or less.  People teach that by selling the verticals so far out of the money that it’s a high probability trade.  People tout it has an 80% or higher probability of profit (POP).

Is the POP Really Over 80%?

Sure it is, but there is something you have to know about this POP.  This style of iron condor may have an 80% POP, but it also has a good chance of a 30% drawdown during the life of the trade.  When this trade goes smoothly, it can make 5% to 10% in a month, but when it goes bad, watch out.  If you are comfortable with large drawdowns, then you might try this trade, but if you want my professional opinion, don’t do it.

Iron Condor Strategy Rating

If I had to rate this strategy, I would give it 1 star.  Why so low?  Because I know strategies that blow this one away.  Why put money into an investment when there are much better options?  The iron condor risks way too much for my personal appetite.  Furthermore, it requires a lot of baby sitting.  Trading iron condors, and I tried them for a few years, is a full time job.  Expect to get up at the morning bell every day and stare at your computer screen most of the market.  This strategy is not scalable either, so why spend your time trying to master it?  At any given moment, this trade can experience an 80% loss.  Remember the flash crash of 2010?  Short term iron condor traders were wiped out.

Those who advertise this strategy as a non-directional trade are not being honest with you.  This trade is very directional, and it loses any direction the market moves.  It’s only easy money if the market is dead for 2 weeks to 30 days straight, which doesn’t happen very often at all.