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Iron Condor Comparison

Best Practices

When selling premium there are two types of Iron Condors that we will use. We call one of them a Balanced Iron Condor. That has long wings that are a fixed number of strikes from the short Call or Put. The other is a Wide (or Dynamic) Iron Condor in which the long wings are chosen dynamically according to their Delta. What are the pros and cons of each and why would a trader choose one over the other?

A list comparing the pros and cons of the balanced Iron Condor (IC) to the Wide/Dynamic Iron Condor was displayed. The pros for the balanced IC was a smaller max loss and a lower margin. The cons were less premium collected and a smaller profit zone. The pros for a Wide/Dynamic IC was greater premium collected and a wider profit zone. The cons were a greater tail risk and a higher margin required.

A list was provided of reasons why a trader would choose Wide/Dynamic Iron Condors and why a trader would use Balanced Iron Condors. The Wide Iron Condors are more similar to a Strangle so the premium collected will be higher and so will the win ratio. They define risk so the trader has less worry or can place the position in otherwise ineligible accounts, such as an IRA account. They also take advantage of high Implied Volatility (IV) with much higher premium. Balanced Iron Condors have no market bias so there is equal risk on both sides. Because the width of the spreads will usually be smaller the margin on a Balanced Iron Condor will usually be less as will the Buying Power Reduction (BPR).

Finally, a table comparing the average performance of the Balanced Iron Condor to the Wide/Dynamic Iron Condor was displayed. The table included the win rate, average P/L per trade, margin required and max loss. The table showed that the Wide/Dynamic Iron Condors had a greater P/L with higher margin and larger max loss. “The more risk you take, the more money you make.”

For more information on Wide/Dynamic Iron Condors see:

Watch this segment of Best Practices with Tom Sosnoff and Tony Battista for a comparison of balanced Iron Condors to Wide/Dynamic Iron Condors, see the pros and cons of both and learn why a trader would use one over the other.

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