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ROC: Iron Condors & Iron Flies

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Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

We have previously shown how two undefined risk trades, strangles and straddles, compare from a return on capital standpoint. However due to the undefined risk in these trades, all account sizes and types will not be eligible to place them. That being said, we can define our risk to create an Iron Condor and an Iron Fly to be able to place these trades in any account.

Today, Tom Sosnoff and Tony Battista take a look at the Iron Condor and the Iron Fly to see how they compare from a return on capital (ROC) standpoint. They find out that by defining their risk, the greatly increase their ROC. Then, they take this one step further and see how the two strategies compare in periods of high and low Implied Volatility (IV). As expected, when these trades were placed in high IV, they outperformed placing the same trades in low IV.

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