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ID: xgbNr19A/biz/60491815#60493360
6/12/2025, 6:02:53 AM
>>60493306
They're the "nothing ever happens" play of the options world. They can have very good risk/reward ratios if you keep them super tight, but, you have to actually land in the sweet spot for it to profit. Margin requirements are small -- you need the difference between the short and long portions of the position on hand, minus the open credit. This means you can open quite a few of them with very little cash. Pic related is a SPY 6/12 599/600/601/602 condor as of market close today (obviously garbage now with the postmarket movement, just using as an example). Max risk is $17, so if you have $1700 in your account you could sell 100 of these and you'd be covered.
Keep in mind that fees actually start adding up for these because they're 4 contracts per position. At my broker, that's almost $3 in fees right there to buy, and another $3 to sell. Speaking of which, the ideal closure for the position is not to sell but to let yourself be assigned -- but that comes with its own risks, and your broker may not even let you do this if you're swinging a lot of them. Imagine you bought those 100 contracts I mentioned earlier, and it closed with the short put $0.01 in the money -- you'd then buy 10,000 shares of SPY and be $6M in debt to your broker! You could sell it all and get back $5,999,900 of that $6M and only lose $100, but your broker may be understandably upset with you if you try to do that.
A better bet is to sell Iron Condors on indexes like SPX, which settle for cash, not shares. In that case if SPY settled like SPX then you'd just hand $100 over to the holder of the call instead of doing all the rigamarole moving $6M worth of SPY around for no reason.
They're the "nothing ever happens" play of the options world. They can have very good risk/reward ratios if you keep them super tight, but, you have to actually land in the sweet spot for it to profit. Margin requirements are small -- you need the difference between the short and long portions of the position on hand, minus the open credit. This means you can open quite a few of them with very little cash. Pic related is a SPY 6/12 599/600/601/602 condor as of market close today (obviously garbage now with the postmarket movement, just using as an example). Max risk is $17, so if you have $1700 in your account you could sell 100 of these and you'd be covered.
Keep in mind that fees actually start adding up for these because they're 4 contracts per position. At my broker, that's almost $3 in fees right there to buy, and another $3 to sell. Speaking of which, the ideal closure for the position is not to sell but to let yourself be assigned -- but that comes with its own risks, and your broker may not even let you do this if you're swinging a lot of them. Imagine you bought those 100 contracts I mentioned earlier, and it closed with the short put $0.01 in the money -- you'd then buy 10,000 shares of SPY and be $6M in debt to your broker! You could sell it all and get back $5,999,900 of that $6M and only lose $100, but your broker may be understandably upset with you if you try to do that.
A better bet is to sell Iron Condors on indexes like SPX, which settle for cash, not shares. In that case if SPY settled like SPX then you'd just hand $100 over to the holder of the call instead of doing all the rigamarole moving $6M worth of SPY around for no reason.
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