CRUSH THE MARKET WITH

IRON CONDORS
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 DISCLAIMER
Any information contained in this presentation is for educational purposes only. Neither IQ Financial Services, LLC or
Gavin McMaster are licensed financial advisors, registered investment advisors, or registered broker dealers. Neither do
they provide investment advice, financial advice or make investment recommendations and they are not in the business of
transacting trades. Nothing in this communication constitutes a solicitation, recommendation, promotion, endorsement or
offer to buy or sell by IQ Financial Services, LLC or Gavin McMaster of any particular security, transaction or investment.

Any trades and / or results covered in this presentation may or may not be live trades.

All trades and trading results are believed to be accurately presented. However, since the trades may not have been
executed in the market, the results may have been under or over compensated for the impact, if any, of certain market
factors such as liquidity, slippage and commissions. Therefore there can be no guarantee of accuracy or completeness.

No representation is being made that any portfolio will, or is likely to achieve profits or losses similar to those shown.

The risk of loss in trading securities and options in particular can be substantial. Customers must consider all relevant risk
factors, including their own personal financial circumstances, before making any financial transaction. Options involve risk
and are not suitable for all investors. See the Options Disclosure Document: Characteristics and Risks of Standardized
Options, available from www.optionstradingiq.com/risks

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 OUTLINE
Iron Condor Theory

How to Choose Strike Prices

Unbalanced Iron Condors

Short-Term v Long-Term Condors

Protection From a Flash Crash

Examples and Tweaks

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 WHAT IS AN IRON CONDOR?

*Please note that the prices and other statistics on the table below are hypothetical, and do not
reflect the impact, if any, of certain market factors such as liquidity, slippage and commissions

• Skew: Much higher implied volatility in puts compared to calls

• Unbalanced: More puts because of the skew helps keep it delta neutral
• Delta Dollars: -1.7 X 1570 = -2,673

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 PROBABILITY

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WHAT IS AN IRON CONDOR?

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 WHY TRADE IRON CONDORS?
Consistent Monthly Income

High Probability

Easy To Manage

Avoids Overtrading

Non-Directional

Short Vega

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SELECTING IRON CONDOR STRIKES
When selecting iron condor strikes there are 3 main considerations:

1. Where to place the short strikes

2. How wide to enter the spreads (10 points, 20 points etc.)

3. Which expiry month to choose

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 SHORT STRIKES
There are 3 main ways to choose the short strikes:

1. Use delta. I.e. Sell 10 delta or 15 delta

2. Use standard deviation. i.e. sell strikes 1 or 2 standard

deviations away from the current price

3. Use technical analysis

Using a combination of all three makes sense, but you also don’t
want to overcomplicate things. Some traders will just sell 15 delta
iron condors no matter what. There is nothing wrong with that.

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 SHORT STRIKE DELTA
Using delta is the most common method for choosing iron condor strikes.

Here we have a fairly standard iron condor set up that I use. The short puts
are at delta 15 and the short calls are at delta 10.

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 SHORT STRIKE DELTA
This is what the payoff diagram looks like. The trade is risking
$8,230 for a potential gain of $1,770 for a potential return of 21.51%

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 SHORT STRIKE DELTA
What if we take a different approach and sell roughly 20 delta strikes? We
get a slightly different looking trade.

The Greeks aren’t too different, Vega is a bit higher and so is Theta.

The Risk / Reward of the trade and management of the trade will be quite
different.

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 SHORT STRIKE DELTA
Here you can see the trade is risking $7,260 for a potential gain of $2,730.
Some traders may prefer this style of trading.
There is no right or wrong style, try a few different ideas and see what
works for you.

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 PRO TIP

Starting an iron condor with negative Delta can be a good idea. The
negative Delta helps to offset the negative Vega.

If there is a sharp selloff = Bad for short Vega, but good for short Delta.

If you start with positive Delta, a selloff will impact the position badly in
terms of both Delta and Vega.

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 PRO TIP #2
Unbalanced iron condors can be a good way to trade a trending market.
For example in recent years the market has been rallying pretty hard and
some traders have been burnt on the call side. Trading less calls than puts
can help prevent this.

Check it out and see what you think.

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 PRO TIP #2
This is what the payoff diagram looks like. You could also sell less put
spreads if we enter a bear market.

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 HOW WIDE?
How wide to set the strikes depends on the instrument being traded.
RUT might be 10 or 20 points wide, whereas SPX might be 25
points wide.

For RUT, 20 point wide spreads means you are trading half as
many contracts. This might be advantageous if commissions costs
are a big factor.

10 points wide or 20 points wide will perform much the same

initially.

However, when the trade gets close to expiry, the bought options
being 20 points away will provide less protection if the stock or
index starts moving close to your short strike.
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 HOW MANY DAYS TO EXPIRY?
The most common type of iron condor is a monthly trade. i.e.
around 30 days to expiry.

Some people prefer to trade 60 day condors and some people

swear by weekly condors.

The main thing you need to know is that shorter term trades will
fluctuate more quickly and will require more trade management.

With longer term trades, traders do no need to react as quickly.

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 WHAT CAN GO WRONG?

Obviously, a big move in the underlying instrument is not what we want.

This can be especially painful if it occurs early in the trade.

Let’s look at 3 different RUT Condors that were entered on March 20th,
2018

The next day, RUT dropped 2.18%

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 WHAT CAN GO WRONG?

1. Monthly Condor: Delta of -16

2. Weekly Condor: Delta of -12

3. 90 Day Condor: Delta of -10

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 WHAT CAN GO WRONG?

1. Monthly Condor: -$550

2. Weekly Condor: -$2,150

3. 90 Day Condor: +$100

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 PRO TIP #3

The further out in time you go, the slower the trade will progress.

In other words, a 4-5% move in the underlying might see traders needing to
adjust a monthly iron condor, but an 90-120 day condor may still be ok.

Weekly condors move very, very quickly and leave very little chance for
adjustment.

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VIX TERM STRUCTURE

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 ROOKIE MISTAKE

While entering an iron condor after a sharp selloff might seem like a good
idea (due to the volatility spike), many times I have seen this lead to losing
trades.

In recent years we have seen many V shaped bottoms with sharp rallies
after some panic selling. If a trader was to enter an iron condor at the
bottom of the market, the call spreads would quickly come under pressure
during a sharp reversal rally.

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PROTECTING FROM A FLASH CRASH
There is no fail safe way to protect against a Flash Crash. However,
buying some deep out-of-the-money puts can provide some
protection.

It won’t prevent losses, but it can help stem the tide until things
settle down.

Typically traders will purchase a put around Delta 2 to 4 and pay no

more than about $2 per contract.

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PROTECTING FROM A FLASH CRASH

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 IRON CONDORS

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RUT 49 DAY UNBALANCED CONDOR

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