### How to Sell an Iron Condor on IWM for a 27.7% Return

Success here is all about allowing the probabilities to work themselves out amidst the iron condor options strategy. Here is my step-by-step approach.

The textbook definition of an option is as follows: The right, but not the obligation, to buy or sell a specified asset at a predetermined price over a predetermined time.

Buying a put is a bearish strategy that requires a price drop in the underlying instrument (stock or ETF). Nonetheless, the most critical factor in trading puts profitably is an ability to predict the future price moves of the underlying instrument.

The investment return on a put is the profit or loss divided by the initial investment. The formula is the following:

Return = (profit or loss)/initial investment

For example, if you buy a **S&P 500 (NYSE: SPY)** option for $4 and sell it for $6, for a profit of $2, your return on investment is 50% (2 divided by 4 equals 0.5, or 50 percent). Annualizing the return will give you another perspective on the return. If this particular trade covered 3 month from beginning to end, you would have made a 200 percent annualized return.

However, in most cases, the return on investment is not the major criterion of buying a put. The main reason for buying is leverage. You can gain large percentage gains with a small investment. The low price of puts makes discussions of rates of return almost meaningless when examined on a trade by trade basis. Many of your trades may make 200 percent, but your losses may be 100 percent. These are large percentages simply because the initial investment is so low.

Selling a put is a bullish strategy. Put sellers want the price of the underlying stock or ETF to rise so they may buy back the put at a lower price or simply let the instrument expire worthless. The ideal situation for a put seller is for the price of the stock or ETF to move above the put’s strike price at expiration, thus rendering the put worthless. The put seller will have captured all of the premium as profit.

Success here is all about allowing the probabilities to work themselves out amidst the iron condor options strategy. Here is my step-by-step approach.

Here is a prime example of my step-by-step approach when trading weekly options. Learn how I trade weekly options and how to put probabilities to work for you.

With my weekly options strategy, I only care about taking action on the highest probability of trades – the ones with the true odds.

Selling puts is the best way to obtain the stock you have been eyeing for a much lower price than where it’s currently trading. Learn the steps for selling puts on General Mills.

Most folks think Warren Buffett got rich with simple "buy and hold" investments. But he made a fortune with special income trades. You can learn just how it is done.