Do you already know even when the stock price doesn’t move, you possibly can still profit by trading options?

In case you mix selling Put Spread and Call Spread options, you possibly can define a low-risk delta neutral trade.

Today, SlashTraders will show you find out how to use the Options Scanner to search out entry points for high-probability and high-profit Iron Condor options. So you possibly can trade neutral options strategies that work.

What Is an Iron Condor?

An Iron Condor works by selling a Put Spread and a Call Spread to define a variety you possibly can take advantage of. So long as the underlying price doesn’t exceed or drop below the strike prices of Put and Call before expiration the 4 options contracts will depreciate in value and we profit as an option seller.

Let’s recall the profit analyses of selling a Put Spread and a Call Spread. We receive a premium after we sell the Bear Call Spread. If the underlying price doesn’t increase, the Call Spread value will depreciate and we earn a profit.

If the underlying price doesn’t increase, the Call Spread value will depreciate and we earn a profit.

But when the stock price increases beyond the Call strike, the utmost loss is the width of the Vertical Spread times 100 minus premium.

We also receive a premium after we sell a Bull Put Spread option. If the underlying price doesn’t drop, the Put Vertical Spread will depreciate in value and we earn a profit.

If the underlying price doesn’t fall, the Put Spread value will depreciate and we earn a profit.

But when the stock price decreases below the Put strike, the utmost loss can be the width of Spread times 100 minus premium.

Once we mix selling a Call Spread and a Put Spread to see why we trade Iron Condors. The Put Spread defines the lower boundary of the value movement. And the Call Spread defines the upper boundary of the value movement.

By combining a brief Call Spread and a brief Put Spread we get an Iron Condor.

If the underlying stock price doesn’t move beyond the boundaries, the Iron Condor strategy will probably be profitable. The utmost loss can be capped if we’re improper.

Maximum lack of an Iron Condor = width of the Vertical Spread strikes x 100 – premium collected

What Is the Difference Between Iron Condor and Strangle?

Though each the Iron Condor and the Strangle are delta-neutral strategies, but they’ve different profit analyses.

By comparing the profit analyses of the strategies, we see each neutral options strategies take advantage of the shortage of price movement.

While the Iron Condor has a limited maximum loss, the Strangle has unlimited maximum losses.

While the Iron Condor has a limited maximum loss, the Strangle has unlimited losses if the underlying price move beyond the Put and Call strike prices.

When an Iron Condor loses, we will roll up or roll down the Vertical Spreads to repair the Iron Condor.

When the Strangle is losing, we will roll the choices to the long run to repaire the Strangle.

When to Use Iron Condors?

When selling Iron Condors, we would like each theta and vega to depreciate the choices prices, so we will sell high price Iron Condors to open, and buy low price Iron Condors to shut.

Theta is the changes to options value with respect to changes in time.

From our experience, selling OTM options with greater than 30 days to expiration have a predictable time value decay. So we might be patient and earn a profit as time passes without much price fluctuation.

Gamma is the changes to delta with respect to changes in stock price. It is usually the acceleration to options prices with respect to changes in stock price.

Gamma grows when the choices are near expiration, resulting in big fluctuations in options value. So regardless of our Iron Condor setup is profitable or not, we prefer to shut the trade or roll it to the subsequent month before 14 days to expiration, to cut back gamma risks.

Vega is the changes to options value with respect to changes in IV.

Since we would like to sell high and buy low, we’d like to sell to open at high IV, then buy to shut when vega causes the choice’s value to decay at low IV.

We also need to search out underlying opportunities less liable to large fluctuations. We will try this by picking stocks with high market capitalisation to cut back the chance of manipulation.

Options Scanner Settings to Find the Best Iron Condor Stocks

Options Scanner is designed to search out high probability and high return Iron Condors in seconds. Listed below are some suggestions to make use of the filtering function to search out the most effective Iron Condor entry points.

Use Options Scanner to search out the most effective Iron Condor entry points.

• We wish to decide on opportunities with greater than 30 DTE to get the safest theta decay and fewer gamma.
• We will filter IV Perc >67% to search out opportunities which have a high probability of contracting IV and vega in our favour.
• By selecting Market Cap ($B) larger than 10 billion, we avoid selecting stocks that may get manipulated and explode like AMC.
• idea is to eliminate stocks with depressed price movement, or in Squeeze, because IV will expand soon after.
• We should always also avoid underlying which have an upcoming Earnings Date in 30 days to cut back the prospect of huge fluctuations.
• Finally, we will sort the Iron Condor ROC by descending order to get a shortlist of highest return Iron Condors.

Based on the Options Scanner filter settings, here is the list of the safest and highest return 0.20 delta Iron Condors for the time being.

The Best Iron Condor Entry Points Right Now

So now we have a shortlist of the safest and high return Iron Condor opportunities, we will fine-tune the choice to get the most effective entry points.

We will use the Options Volume within the watchlist to search out more liquid options opportunities. Within the list of high return Iron Condors, CVS has the best Options Volume, so we recover fills when entering and exiting trades. Let’s trade an Iron Condor for CVS.

Once we sell an CVS Iron Condor that expires in 46 days, if the CVS stock price doesn’t exceed the short Put and short Call strike prices, we will make 38% maximum profit when the 4 options expire worthless.

A CVS short Iron Condor that expires 46 days later has a maximum return on capital of 38%.

Now you already know find out how to use the Options Scanner to filter the most effective Iron Condor stocks to trade. Remember to make use of the scanner often to search out high return neutral trades to sell, and take advantage of the shortage of price movement.

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