November 3, 2008
Paper Trading Credit Spread and Iron Condor Option Trades
Paper trading using one of the many virtual trading systems provided by option brokers, and now CBOE, is so important if you have never traded options. This is especially important trading credit spreads, like Bull Puts and Bear Calls and ultimately Iron Condors. These are special strategy trades that must that must be fully understood before trading with your own funds. You must practice entering, closing and adjusting Bull Put and Bear Call spread trades. You must fully understand an Iron Condor trade and the requirements for making sure your broker only applies margin to one side of this 4 legged trade. And most important you must practice closing these spreads and rolling to new spreads when trades go against you.
I paper traded for six months using OptionsXpress’s virtual trading system before using my own funds. This is the system now used by CBOE so new traders no longer need to apply for a brokerage account to paper trade using a virtual account.
To get started you should establish a virtual trading account with your broker or just use CBOE’s free system. You must practice all types of credit spread trades like:
1. Entering new trades using the current bid.
2. Entering new trades using limits that are higher than the bids, like one half of the bid/ask or midpoint. Then shave 5-10 cents off this midpoint.
3. Enter stop loss orders to close profitable spread trades for 10 cents or less freeing up margin for new trades.
4. Practice adjusting Bull Put and Bear Call credit spreads. You should close and roll to new credit spread trades to collect another credit. This is the most important one to practice and master before committing your own funds.
The 4 types of trades above should be practiced many times over for a period of 2 to 3 months. Never enter into one of these specialty options trades using your own funds until you completely understand all the risks. You must have an exit plan and know exactly what to do when a trade goes against you.
Once of the huge advantages you have with option spreads is that you can break even when a spread trade has to be closed. This is accomplished by adjusting, or rolling, to a new spread trade to collect a new credit. Sometimes this new credit offsets, or exceeds, the debit you incurred closing your original spread. This is a key risk management procedure that you can master paper trading. Once you complete a few of these rolling trades you will really get excited about trading credit spreads and be able to protect your monthly cash flow so that you are always adding net credits to your account.
By: Brad Griffin
About the Author:
I paper traded for six months using OptionsXpress’s virtual trading system before using my own funds. This is the system now used by CBOE so new traders no longer need to apply for a brokerage account to paper trade using a virtual account.
To get started you should establish a virtual trading account with your broker or just use CBOE’s free system. You must practice all types of credit spread trades like:
1. Entering new trades using the current bid.
2. Entering new trades using limits that are higher than the bids, like one half of the bid/ask or midpoint. Then shave 5-10 cents off this midpoint.
3. Enter stop loss orders to close profitable spread trades for 10 cents or less freeing up margin for new trades.
4. Practice adjusting Bull Put and Bear Call credit spreads. You should close and roll to new credit spread trades to collect another credit. This is the most important one to practice and master before committing your own funds.
The 4 types of trades above should be practiced many times over for a period of 2 to 3 months. Never enter into one of these specialty options trades using your own funds until you completely understand all the risks. You must have an exit plan and know exactly what to do when a trade goes against you.
Once of the huge advantages you have with option spreads is that you can break even when a spread trade has to be closed. This is accomplished by adjusting, or rolling, to a new spread trade to collect a new credit. Sometimes this new credit offsets, or exceeds, the debit you incurred closing your original spread. This is a key risk management procedure that you can master paper trading. Once you complete a few of these rolling trades you will really get excited about trading credit spreads and be able to protect your monthly cash flow so that you are always adding net credits to your account.
By: Brad Griffin
About the Author:
Brad Griffin is an Accountant and CPA and has been Investing in the U.S Stock Market for 30 years and the options market for the past 5 years. I am now sharing my knowledge and success trading options at my website
Index Spread Options Trading Service.
Filed under Non Fiction by Administrator
October 14, 2008
How you Can Benefit From Trading Options With Iron Condors
Using Iron Condors, an investor can generate a solid monthly income and can achieve 10% returns every month, consistently. If you’re tired of whipsaws and drawdowns in your trading account, learn more about iron condor options strategies. The unique and powerful ability of iron condors is that they enable you to make money no matter which way the market goes.
Description of an Iron Condor
An iron condor is a type of options spread trade that involves simultaneously buying and selling multiple contracts in order to capture a particular segment of future market movement.
The iron condor is a neutral strategy that is a combination of a two different options strategies: a bull put spread and bear call spread. A bull put spread strategy is when an investor sells a higher striking option and buys a lower striking option on the same stock with the same expiration date. A bear call spread strategy is when the investor buys call options of a certain strike price and sells the same number of call options of lower strike price on the same stock expiring within the same month.
There should always be an even number of options traded, in multiples of four, so that the trade is always weighted equally with no downside or upside bias. This strategy is non-directional because it works independently of market movement, meaning it does not matter whether the market goes up or down.
Benefits of Iron Condors
The great thing about the iron condor trading strategy is that it is a neutral strategy, which gives you the upper hand. Trading options with iron condors can be a risky and costly trade, but there are several advantages that you will find with no other method.
As mentioned, this is a neutral strategy allowing an investor to make a profit within a large region by balancing both kinds of spreads. One of the biggest advantages to this volatility trading is the limitation of losses you will face. Losses are limited if the stock goes against you in one way or another.
Trading Iron condors can be fairly easy and fast using the Condor Options strategy. An investor can make money with as little as ten minutes per week. In addition, each investor can choose how they handle the risk and volatility. A conservative investor can sell fewer options and invest the returns in a high yield bond. An aggressive investor can sell up to 10 iron condors a week and reinvest the returns with expert advice.
There are many different strategies and investments to choose from within the stock market. Trading options with iron condors has several advantages that can potentially give an investor the upper hand in the stock market and manage the inherent volatility to their maximum benefit.
The description of an iron condor is simple, it is a way an investor can generate a solid monthly income and achieve 10% returns every month, consistently. Trading options with iron condors has several advantages that can potentially give you the upper hand in the stock market.
By: Groshan Fabiola
About the Author:
Description of an Iron Condor
An iron condor is a type of options spread trade that involves simultaneously buying and selling multiple contracts in order to capture a particular segment of future market movement.
The iron condor is a neutral strategy that is a combination of a two different options strategies: a bull put spread and bear call spread. A bull put spread strategy is when an investor sells a higher striking option and buys a lower striking option on the same stock with the same expiration date. A bear call spread strategy is when the investor buys call options of a certain strike price and sells the same number of call options of lower strike price on the same stock expiring within the same month.
There should always be an even number of options traded, in multiples of four, so that the trade is always weighted equally with no downside or upside bias. This strategy is non-directional because it works independently of market movement, meaning it does not matter whether the market goes up or down.
Benefits of Iron Condors
The great thing about the iron condor trading strategy is that it is a neutral strategy, which gives you the upper hand. Trading options with iron condors can be a risky and costly trade, but there are several advantages that you will find with no other method.
As mentioned, this is a neutral strategy allowing an investor to make a profit within a large region by balancing both kinds of spreads. One of the biggest advantages to this volatility trading is the limitation of losses you will face. Losses are limited if the stock goes against you in one way or another.
Trading Iron condors can be fairly easy and fast using the Condor Options strategy. An investor can make money with as little as ten minutes per week. In addition, each investor can choose how they handle the risk and volatility. A conservative investor can sell fewer options and invest the returns in a high yield bond. An aggressive investor can sell up to 10 iron condors a week and reinvest the returns with expert advice.
There are many different strategies and investments to choose from within the stock market. Trading options with iron condors has several advantages that can potentially give an investor the upper hand in the stock market and manage the inherent volatility to their maximum benefit.
The description of an iron condor is simple, it is a way an investor can generate a solid monthly income and achieve 10% returns every month, consistently. Trading options with iron condors has several advantages that can potentially give you the upper hand in the stock market.
By: Groshan Fabiola
About the Author:
The description of an iron condor is simple, it is a way an investor can generate a solid monthly income and achieve 10% returns every month, consistently. Trading options with iron condors has several advantages that can potentially give you the upper hand in the stock market.
Filed under Business by Administrator