Iron Condors can be very profitable at times so how do you find the best time to place an iron condor? When should you enter the trade? This is what everyone wants to know.
Well there are a couple of things that might be helpful.
1. When the Market is going Flat
When stocks are not trending so much in either way but staying relatively flat that is the best opportunity to look for iron condor spreads. During times like this it may be hard to trade directionally but trading iron condoms can be a pretty good idea.
2. Is the stock Range bound
Is the stock bouncing between support and resistance? You only want to sell iron condors on stocks that have clearly defined support and resistance levels. Why? Because those are the levels you will use as a
guide to where you should sell each leg of the spread.
3. Does it have good probabilities
Most traders look at probability graphs when deciding if an iron condor trade is appropriate. They will also have a minimum probability of success that the stock should have for them to want to enter the trade. Personally I do not care much about the probability graph; it is all about what the chart looks like to me.
4. Can you make a decent return by selling far out of the money options?
Now this is different for all people, but it is wise to have some sort of minimum return on each iron condor trade. You do not want to place a trade if it is only going to give you a 2 or 3% return. That gives you too much risk for too little return.
5. Do both ends of the condor give you a good premium?
An iron condor is made up of both a bull put spread and a bear call spread. One thing you should look at is how much credit each end is bringing in. If 1 end is bringing in almost the entire credit you might want to look at not doing an iron condor, but doing a simple spread instead.