Leg into the Iron Condor by placing the first leg immediately after an earnings announcement.Examples are AMZN, PCLN, GOOG, GOOL, NFLX, AZO Choose stocks which have a habit of moving strongly in one direction after an earnings announcement.These will generally track with the overall market, generating enough premium to make sellers happy. Choose underlying stocks with a Beta of about 1 - 1.5, with weekly options, and moderate to high volume in the options.So what is the solution? How do you plan and place an Iron Condor so that it is virtually guaranteed to not lose money? Here is the most successful plan I know. Answers to this problem are 1) only trade Iron Condors on stocks that don't move very much (but major news can disrupt that plan), 2) place your strikes far enough away that they won't be broken (no guarantee is possible, however), and 3) get enough credit on the spread to cover any potential losses (not likely on more stable stocks).
Then the option writer (seller) must buy it back for a loss. So how does an Iron Condor lose money? There is only basic way to lose: the price of the underlying stock moves too far (out of recent range), causing the purchase price of the option to exceed the original selling price. The time value or theta of the purchased options always diminishes over time, so once again the seller wins. However, at expiration, the price cannot be in two places at once, so the seller of options on one side always wins. The basic theory is that option holders will purchase puts and calls to take advantage of price changes in the underlying, and so sellers of options provide these options for a cost. Iron Condors are the best tool for profits from time decay because they reap income from both sides of the spread, from both puts and calls. All informed traders know that there are only three ways to make money in options: either you profit from changes in the stock price, or from major variations in volatility, or from time decay. So let's go back and take a look at how the Iron Condor works. Here is a new strategy that will revolutionize your Iron Condors and make them virtually fail-proof.
However, there a second reason: they failed because they did not collect enough credit. The most common reason is in the setup-the spread was not placed wide enough. But often traders get into trouble and lose money with them. Iron Condors are perhaps the most popular options strategy in the book.
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