Make 32.7% in the NASDAQ in Just 52 Days (step-by-step instructions)
32.7% NASDAQ Profits in Just 52 Days (step-by-step instructions)
Every week, I get an email that looks just like this:
Hi Andy- Quick question. You trade lots of different strategies. What is your favorite strategy? Which one should I trade? Thanks!
Now, I typically avoid answering this question. Why? Because to be a successful trader, you must diversify amongst a variety of options selling strategies.
Just like a portfolio of stocks, diversification is the key to long-term success with trading. But, if I had one strategy that fell into a favorite category it would be no doubt be iron condors.
The iron condor is a non-directional options strategy that profits when the option on the underlying stock or exchange-traded fund expires within your chosen range at expiration.
The basic premise of the strategy is easy.
You choose the price range of the trade. If the investment stays within your chosen range over a chosen amount of days, then you make a profit.
Increasing the range will decrease your potential profits, but will increase your likelihood or probability of success. It’s all about finding an appropriate risk/reward balance, something I will discuss in inside this LIVE training (click here).
The first requirement when trading iron condors is to make sure you are using a highly liquid security, in most cases an index ETF like DIA, SPY, IWM or QQQ.
What does “highly liquid” mean? In terms of trading options, this just means that the bid-ask spread is tight, say within $0.01 to $0.05.
For instance, lets take a look at the heavily traded Nasdaq 100 ETF (QQQ).
The ETF was recently trading for $141.94.
QQQ is just one of 30 to 50 ETFs that is considered “highly liquid” among most options traders. I focus my attention on roughly 30 of those ETFs.
I then move on to my mean-reversion indicator, otherwise known as RSI (5).
RSI (5) can be seen at the bottom of the QQQ chart above. You’ll notice peaks (overbought) in green, and valleys (oversold) in red. I typically want to place a trade when the indicator is in between those areas. It’s called being in a neutral state.
Choosing Your Range and Return
Right now, QQQ is trading for roughly $141.94.
When using iron condors, I target a probability of success of at least 80%.
First, I look at the call side of the iron condor, also known as a bear call spread. I want to find the short strike with an 80% probability of success.
The October 148 calls fit the bill, as it has an 81.25% probability of success.
Next, I take a look at the put side with the same goal in mind: a probability of success of 80% or higher.
However, I am currently slightly bearish on the stock market in the near term. So, I want to increase my probability of success slightly. I’ll have to forgo some of my potential return to do so.
At 85.13%, the October 131 puts is the trade I want to make. If I were to go with my typical 80% probability of success I would need to sell premium on a strike that is closer to the current price of the ETF.
So, right now I have my starting range of $148 and $131 established. Obviously, I can alter it as needed, but first I want a good base for my iron condor trade.
What’s the Return?
By selling the 148/151 bear call spread and the 131/128 bull put spread simultaneously – thereby forming an iron condor – you can make $0.74, or 32.7%, over the next 52 days.
Go here to see LIVE trades in my exclusive training. Plus, I’ll answer every single question.
QQQ would have to breach the break-even levels of $148.74 or $130.26 by October expiration before the trade begins to take a loss.
Best of all, the probability of success on the trade is a staggering 81.25% on the upside and over 85.13% on the downside. I like those odds.
I typically manage the trade by taking a loss if the spread increases to around $1.35-$1.50, roughly double the premium sold. I want to keep my losses small, knowing that I can make up for the loss if all goes well in the next trade.
Remember, we are trading math here. It’s all about allowing the probabilities to work themselves out, so we want to try to keep losses to a minimum, knowing that if the statistics play out, our wins should far outweigh our losses.
Most investors – including serious traders – are NOT using this income strategy. And that creates a huge advantage for YOU.
This exclusive training is designed to be a mini Master Class – giving you everything you need to start trading this strategy.
Again, if you wish to learn more about how I trade iron condors, check out my upcoming webinar.