24. Iron Condors and Double Diagonals
The iron condor trade and the double diagonal trade are popular nondirectional strategies. These trades are designed for a stock or ETF whose price is expected to remain within a reasonably narrow range during a 1-to-2-month time period. Both of these trades are credit trades. That is, the initial result of doing the trade is that cash is brought into your brokerage account. With these credit trades, the plan becomes one of waiting for the time value of the short options to decay as the stock price moves in a generally sideways direction.
The Iron Condor Trade
The basic setup of the iron condor is to sell one out-of-the-money call and one out-of-the-money put with strike prices that are about equally placed ...