For this segment of Strategies in Your IRA, Tom, and Tony discuss Iron Condors inmarkets. Should IRA traders be buying cheap instead of selling them?
When(IV) is low, credits received for short premium trades decrease while Buying Power (BPR) stays relatively constant. Since the Iron Condor is theoretically a 50/50 shot no matter what side you take, we should take the side with greater profit potential.
In practice, the long Iron Condor does not payout 50%; and even if it gets close via, it does not pay enough. Also, buying Iron Condors performed worse in low IV due to the tendency of low IV to be followed by low IV.
In conclusion, in low IV we are receiving smaller credits for trades such as the Iron Condor, but this reduced ROC is not enough to deter us from selling them.