We’re going to take a look atfour Iron Condor setups. So that you cansee the different variations and theways that you can set up Iron Condors.
Iron Condor setups canget a little more complicated than justa primary Iron Condor flat normal balancedposition. There’s a couple differentsetups and variations that you can dobecause the flexibility of this is excellent. You can do a lot with IronCondors. I wouldn’t say it’s the mostflexible strategy out there, I would saydiagonals is probably the mostflexible strategy, but Iron Condors arestill very manageable.
Most people, whenthey look at Iron Condors, they look at a profitpicture. Let’s say we have fiveverticals here on the put side – the put side will allow us to make moneyas stocks go up. Here we have thecall side – so we make money as the stockprice goes down.
The Balanced Iron Condor Setup
This is abalanced Iron Condor is whatmost people know. We’ll call this The Balanced Iron Condor Setup.
The way the balance is set up is youhave the same amount of contracts oneach side. You have five puts thenyou’ll have five calls, if you have sixcalls then you’ll have six puts.
It’s verybalanced. It’s not talking about thewidth or spread because you can still gowider. This could beat the 280 strike price, butyou could go ahead and go wider on this.Then this might be maybe at the250 strike price so that you could widen itout, but the setup is still thesame. It’s just you’re either tighteningthings or widening things.
Iwould say that this is a wide or ahigh probability Iron Condor.
Skewed Iron Condor
We have variation B, and you’ll have more bullish set up for your Iron Condor.In this case, what you’ll do is let’s say you have seven contracts on oneside over here and onlyhave three contracts on the call side. Again, this is the call, this is the put, and this is unbalanced or skewed bullish.So, I’ll say Skewed to the BullSide because you have much more putsgoing into that bullish direction.
You have the opposite ofthis as well where you could go a little bit lighter on thecall side or a little bit lighteron the put side. This could be threeover here, and this could be sevencontracts over here on the on the callside. Here’s our put side now. Thiswould be Skewed Bearish. Thiswould be our third Iron Condor setup.
The last one I want toshare with you, it’s a little bit more advanced. You can see we went from a balanced one to a skewedbullish to skewed bearish. Inbetween all of these, you have kind ofsecondary variations like here we wentwider. You could also go skewedbullish much wider as well or eventighter. You could go with skewedbearish tighter or wider.
But here’s ourlast and final variation that I want toshow you here of an Iron Condor, and itmay look a little funky here for you. It seems something like this, and you’regoing to think that this is a butterfly probably.
What you can do isgo ahead and take the two tips of yourIron Condor. The best way to explainthis is to go ahead and drawanother Iron Condor here for you. What you’re doing is you’re taking thesetwo tips, and these two strikes arethe same, so you make them thesame strike right there at that point. That’ll create that peak.
Iron Butterfly
What is an iron Condor if youdefine it? It’s four contracts, even though this might looklike a butterfly the contracts are stillthe same. So, if I had my 280protection over here and let’s say thiswas 350 okay and somewhere in the middleover here we’ll go 320 let’s do 310okay so let’s go 310 right here well Ihave multiple contracts over here at 310. This is two, and this would be one, andthis would be one contract overhere okay so what this is called, is thisis called an Iron Butterfly? In a way butit’s still an Iron Condor setup.
Take a look at where you are withthese Iron Condors, if you’re justgetting started, you coulddo a basic set up, and this would be abalanced Iron Condor.
Unbalanced Iron Condors
As you get intovariations of that, you could go wider ortighter then you have some skewed oralso known as Unbalanced Iron Condors.
Now you have puts and calls wherethey’re different so that you mightgo seven puts or ten puts and threecalls or four calls. They’re a littlebit different, and on the bearish side,you might go seven calls andthree puts or fifteen calls on thebearish side or the call side and oneput on that side.
Now you have theseskewed positions or unbalanced positionsbut if you have a stock that’s a littlebit trickier to trade or doesn’t have alot of strike prices sometimes, creatingsomething like this – which is still aniron condor could be called an IronButterfly it’s anothervariation of an Iron Condor.
You can see there arefour different real significant variations toIron Condors. Of course, there are alsosubsets of those like wider, tighter andmany different variations that you couldcreate within that but these are kind ofthe baselines to get you started.
