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23 of 24 people found the following review helpful:
4.0 out of 5 stars
Take a ride on a condor!, January 31, 2011
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The iron condor is basically an option trade that involves selling and buying two out-of-the money calls and two out-of-the money puts in the same month for one stock or index. Actually, you are really putting on two vertical spreads, one on each side of the current price of the stock or index.
The author favors trading the SPX, RUT, and NDX mainly for reasons of liquidity and the fact that as European-style options you do not have to worry about exercise prior to expiration date. Interestingly, the back cover stresses the ability to earn consistent returns very month with "surprisingly modest risk," but the author himself states early in the book that this should not be considered to be an income strategy and then he goes on to stress that there are a lot of risks with this strategy. In fact as he explains, those risks make it imperative that the trader keep a watchful eye on both "wings" of the condor so that adjustments can be made as needed. This is definitely not one of those trades that you can put on and then just check every week or so.
Although many traders who use spreads typically like to leave their trades on for as long as possible in the hopes of keeping most, if not all of the amounts that they were credited when the trade was opening, this author actually recommends against holding trades open for this long. He definitely is more in favor of going for singles rather than home runs. For example, he claims that "the exit strategy that works best is to give back almost all of the credit. If you take in an initial 16% credit and keep only 3%, 4% or 5%, you're giving back most of the potential profits. How many trades have you made that can consistently make profits of 3% in a few days regardless of the direction of the market?" I see his point, but if you are someone who has only previously traded options from the long side, be prepared to change your way of thinking.
Those who have been involved in other types of spreads may already be familiar with much of the material found in the book, but those who have not been involved in selling options or in spread trading of any type will find this book interesting. If you read the book and decide that you're really not that interested in this particular strategy or type of trading, you won't have to waste much of your time since the book can be finished in one sitting.
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11 of 11 people found the following review helpful:
5.0 out of 5 stars
A great strategy if you have time to monitor every day, March 11, 2011
Customer review from the Amazon Vine™ Program (What's this?)
Most books on options try to be all things to all people by starting off with a basic education in options and then proceeding to give the basics on many different trades. This book drills deeply into a strategy using condors that is largely rules-based and that gives you good methods for adjusting the trade and preserving capital if the trade isn't working out as planned. It is a fully detailed strategy for profitable condors.
While the book does spend some time on options basics, most of the focus in this area is on "the Greeks." The book rapidly moves into how to put on the trade, when to put on the trade, how much credit you should get for it, when to get out of the trade and how to adjust the trade if necessary. It reminds you that having a plan for exiting a trade is often as important as having a plan for making the trade to begin with.
I waited until I put on a few trades with this approach to see if my opinions would change. So far, my trades using this approach have worked out well.
If I had one minor complaint with the book it is that it should be a little more forceful in its admonitions that, in a single position, you are generally risking $2100 to $2200 to have a maximum profit $300-$400, assuming the position were held until it was closed. Since you're not holding until the close, your typical upside in the trade is more like $100-$150. The point is, if the market moves against you quickly with this trade, you can lose your shirt very quickly. That is a low probability event and the author shows how to mitigate these risks, but that doesn't change the fact that you may occasionally suffer a devastating loss (like with a quick drop in the market and a surge in volatility, both of which can work against you simultaneously). Accordingly, if you can't pay careful attention to the market to manage the position, this would not be the book for you.
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13 of 14 people found the following review helpful:
5.0 out of 5 stars
High praise!, February 7, 2011
I'll give this book on options trading high praise. It's practical, and I have already begun putting the writer's trading philosophy to the test in the markets. Benklifa describes a philosophy and a set of rules or guidelines towards trading iron condors that is quite different from anything I had heard about previously. As I was reading, it kept occurring to me, "this can work..." which was really exciting. An iron condor is a non-directional trade seeking to make money either from a drop in volatility or from a lack of trend, or both. Yet the writer's trading philosophy can be implemented using directional vertical spreads also. For example, a trader could simply sell an out of the money vertical in the direction that the underlying is not expected to move. The "trading journal" in chapter 3 was especially valuable as it fleshed out the writer's thinking as he put trades on and adjusted them. The only part of the book that seemed to deserve more discussion was on adjustment methods. One method that was discussed towards the end of Chapter 3 was rolling farther out, the wing of the condor that is getting too close for comfort as shown by the deltas. However this will usually cost a debit to make the roll, thus reducing the credit on the whole trade, perhaps reducing the credit significantly. One adjustment that was not discussed in the text would be to follow this up by selling another wing in the "safe" direction. Although this adds more risk to the overall trade, it pulls in a credit, and possibly makes the rolling of one wing, farther out, less expensive. Also, there are other adjustments that are not covered in the text. However this book is astoundingly useful and practical. Five stars, and well deserved!
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