A skewed iron condor is a defined risk strategy that combines an iron condor and an embedded call spread. It takes what is a normally non-directional trade and makes it directional (although we can also make it directional through strike selection). With a normal iron condor we would sell the call spread and the put spread at the same width, but with a skewed iron condor we might sell a $1 wide put spread and a $2 wide call spread to create the skewed iron condor. We use this strategy in a high IV environment or when we have a directional bias (selling into strength or buying into weakness).
Skewing one side of the iron condor essentially transfers the risk from one side of the trade to the other, adding a delta component. For example, if we wanted to add positive deltas to our iron condor, we would open up the put side of the trade. This would transfer risk from the call side to the put side which would make this a slightly bullish trade. If we didn’t want to widen the strikes but wanted the positive delta component, we would place the put side of the trade closer to ATM while moving the call side further away from ATM. This type of iron condor will be discussed further in another section.
The skewed iron condor is a strategy that works in all environments. We can skew the side that works best for the volatility environment we are in, but no matter what, we want IV to go higher in order to give us a better opportunity to make money.
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