The Chicken Iron Condor

What Is An Iron Condor?

First of all, let’s start with “what is an iron condor” before we get into the chicken variety.

The iron condor is an option trading strategy that consists of four contracts – a bull put spread and a bear call spread.

The first image above shows a regular iron condor where the trader is selling the closer to the money options and buying options further away. The trader is looking for the stock to stay within the specific range over the course of the trade.

The second image shows a reverse iron condor where the trader buys the closer in options and sells the further out options. Here the trader is looking for the stock to break out and make a big move in either direction.

A regular iron condor will result in a credit being received in the traders account whereas a revers condor needs to be paid via debit from the account.

The maximum profit on an iron condor is equal to the premium received and the maximum loss is the difference between the strikes prices less the premium received.

The situation is swapped around for a reverse iron condor.

Now that we know what a regular iron condor is, let’s take a look at the chicken iron condor.

What Is A Chicken Iron Condor?

Now that we have a solid understanding of the iron condor and the reverse condor, let’s take a look at the chicken iron condor.

Chicken iron condors are a directional neutral trade and are like a regular iron condor they are profitable when the underlying expires between the inside strike prices rendering all 4 contracts worthless.

A typical benchmark for iron condors is that you’ll try to sell your spreads for one-third of the width of the spread itself.

For example, if the spread is $3 wide you’ll want to collect $1 in premium.

The chicken iron condor seeks to take advantage of sharp moves in implied volatility and will collect 50% of the spread width in premium.

1 2 3
View single page >> |

Disclaimer: The information above is for educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are ...

How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.


Leave a comment to automatically be entered into our contest to win a free Echo Show.