• Document: The Advanced Iron Condor Trading Guide
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The Advanced Iron Condor Trading Guide Trading the Greeks and Active Risk Management First Edition By Craig Severson The Advanced Iron Condor Trading Guide Trading the Greeks and Active Risk Management First Edition By Craig Severson © Copyright 2011 by Craig Severson All Rights Reserved No duplication or transmission of the material included within except through express written permission from the author, craig@optionslinebacker.com. Additional images courtesy of thinkorswim and TradeStation™. All of the position analyzer graphics were provided through thinkorswim’s analyzer tool, with some augmentation. Cover image © Copyright 2011 by Craig Severson. Be advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. The principals of, and those who provide contracted services for OptionsLinebacker and Hampshire & Holloway LLC: -are neither registered Investment Advisors nor a Broker/Dealers and are not acting in any way to influence the purchase of any security -are not liable for any losses or damages, monetary or otherwise, that result from the content of any written materials, or any discussions -may own, buy, or sell securities provided in written materials or discussed -have not promised that you will earn a profit when or if your purchase/sell stocks, bonds, or Options. You are urged to consult with your own independent financial advisors and/or broker before making an investment or trading securities. Past performance may not be indicative of future performance. Securities provided in written materials or discussed are speculative with a high degree of volatility and risk. Opinions, analyses and information conveyed whether our own or based on sources believed to be reliable have been communicated in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. We do not necessarily update such opinions, analysis or information. All information should be independently verified. All rights reserved. No duplication or transmission of the material included within except through express written permission from Hampshire & Holloway LLC, support@optionslinebacker.com. OptionsLinebacker.com is a division of Hampshire & Holloway LLC, an Ohio Limited Liability Company. 2 Table of Contents Foreword .....................................................................................4 Introduction .................................................................................8 Gaining an Edge by Selling Options ......................................................9 Understanding the Options Greeks .....................................................11 Greeks - Delta Definition and Examples ..................................12 Greeks - Gamma Definition and Examples ................................18 Greeks - Theta Definition and Examples ..................................25 Greeks - Vega Definition and Examples ...................................28 Using the Greeks for Risk Management ................................................35 Delta Neutral/Managing Delta Risk.....................................................40 Delta Position Management Examples .....................................55 Managing Gamma Risk ....................................................................65 Using Butterflies to Neutralize Gamma ...................................72 Managing Vega Risk .......................................................................81 Vega Position Hedging Example ............................................87 Active Risk Management Techniques ...................................................93 Lower Probability Iron Condors ........................................................104 Putting it All Together - Examples ....................................................116 High Probability Iron Condor Example ...................................118 Low Probability Iron Condor Example ....................................136 Trading like a Professional Market Maker ............................................146 Final Thoughts............................................................................153 Appendix A - High Probability Iron Condor Rules................................

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