How to Create a Wide Profit Zone by Writing Condors in Commodities


Jun

25

2018

How to Create a Wide Profit Zone by Writing Condors in Commodities

The Condor or “Enhanced Strangle” can offer a huge margin for error and a double dose of downside protection. Here is the benefit of writing them in Commodities.
  1. john jabbour Says:
    June 26, 2018 at 7:21 pm

    Do you ever trade the futures outright when a set up is to good to pass on?

    • Michael Gross Says:
      July 2, 2018 at 3:21 pm

      John,

      Fair question but the answer is No. The entire purpose of selling options is to avoid trying to guess market direction. Trading the underlying contract is attempting to do exactly that in a highly leveraged manner. If you want to take a little play money and have some fun, have at it. But just consider it for what it is – speculating. For the serious money, I like having the odds favoring me. And I’ve been in this business way too long to try to pretend I can out guess short term market direction. That’s why you sell the option. You want to be able to make money – even when you’re wrong. Thus, I recommend not trying to guess at short term direction – no matter how “good” the situation looks.

      I hope that helps.

      Regards,
      Michael

  2. Do you ever use calendar spreads, time spreads?

    • Michael Gross Says:
      January 2, 2018 at 3:44 pm

      John,

      We have not used them lately but calendar option spreads are a viable strategy.

      Regards,
      Michael

  3. Hi Micheal, very interesting strategy. i have question.i guess it would be better to apply such a strategy on markets with a good q.ty of strikes and Open interests in order to have the best orded execution either when position is opended and closed. Would You reccomend any particular market?Also it looks to me (correct me if i am wrong) that such a strategy suit well when volatlity is high and with markets that are suppose to trade in a range. Thanks a lot

    Giuseppe

    • Michael Gross Says:
      January 2, 2018 at 3:47 pm

      Giuseppe,

      You are correct. Strangles are well suited to markets with higher volatility and/or availability of deeper out of the money strikes. There is no one particular market where strangles work best. It all depends on the previously mentioned factors and the fundamental price outlook.

      Regards,
      Michael

  4. Some of the options you recommend selling have very little open interest, less than 100 in some cases. Is there a minimum open interest number you would suggest using when getting into a market?

    • Michael Gross Says:
      January 2, 2018 at 3:49 pm

      John,

      The illustrations used in the example are just that, examples. You’ll have to trade in markets or months with adequate open interest if you decide to go this alone. For individual traders, I’d look for options with at least 300-500 open contracts. I hope that helps.

      Regards,
      Michael

  5. I’m trading with TOS/TD AMeritrade and they always add margin to BOTH sides of a strangle.
    Can you recommend a broker who doesn’t do this?

    • Michael Gross Says:
      January 2, 2018 at 3:52 pm

      Billy,

      I cannot without doing the research. I typically recommend looking into Interactive Brokers for investors wishing to try this on their own. But I understand they add an upcharge to margin. Going managed can solve this problem but managed accounts are not for everybody.

      Regards,
      Michael

  6. Hi Michael,

    Great lesson. When doing the ratio put spreads how far above your sold puts are you buying your protection put?

    • Michael Gross Says:
      April 21, 2017 at 2:58 pm

      Dear Jamie,

      That is a short question with a long answer – too long to answer in this venue. Not to be a cop out but, it all depends. You want to pick markets with higher volatility. Your goal would be to write the two strikes as close together as possible while still yielding a worthwhile spread between the two. I’d advise at least a $600 premium spread between the two strikes. However, the further apart the strikes, the wider your risk zone.

      I hope that helps.

      Regards,
      Michael

  7. Hello Michael,

    Thanks for the video. Could you say a few words about margin requirements for this particular options combination? Will long position have an effect on total margin requirement?

    Thanks.

    • Michael Gross Says:
      April 20, 2017 at 3:52 pm

      Hello Andrew,

      Yes. Margin requirements for condors will typically be less than naked strangles. This is because the exchange recognizes the limited risk aspect of the spread, and thus requires less margin. In some cases, this can mean a higher potential ROI on a “covered” spread like a condor.

      I hope that helps.

      Regards,
      Michael

  8. rick rutherford Says:
    April 19, 2017 at 7:16 pm

    Michael — I am really enjoying all of your instruction. I am unable to meet the asset/ income levels required for an account with you guys so do you have any plans to ever lower the requirements??

    • Michael Gross Says:
      April 20, 2017 at 3:58 pm

      Hello Rick,

      Thank you for your email. We have no plans to lower the minimum account level as we can only accept a limited number of investors. Our recommended account level is US $1 MM. At some point in 2018, that will likely become the minimum allocation.

      I wish you the best of luck in your investments and am glad to hear you are enjoying the information.

      Regards,
      Michael

  9. kanu bhatia Says:
    April 19, 2017 at 5:08 am

    Hi Michael, I am regular follower of your news letter past 6 months & results are great only one small loss under $100, on 10 k account 96% gain for 1Q 2017.

    This is a great strategy have used in equity work very well, but run into problem executing future options. I use OptionsXpress online platforms which don’t allow me more than 2 legs at a time. Also I use (TOS)Think or Swim which allows me 4 legs at a time but can’t get data more than 60 days.
    Do you know off any platform which allows execution of 4 legs and 6 to 9 months out data? your help in this subject is highly appreciaeted.
    yhanks
    kanu

    • Michael Gross Says:
      April 19, 2017 at 1:38 pm

      Dear Mr. Bhatia,

      For self directed traders such as yourself, I would suggest having a look at Interactive Brokers. Their platform is a bit more sophisticated. But they offer what you are looking for.

      Thanks
      Michael Gross

  10. gene goodwin Says:
    April 19, 2017 at 12:13 am

    thank you. great presentation.
    retired commercial pilot and am down to 50k of “risk” capital…and cannot meet your net worth requirement most (assets in real estate)..but am fairly well versed in option trading and lots of on the job learning…will have a look at your book.

    again, thanks.
    mr. goodwin

    • Michael Gross Says:
      April 19, 2017 at 1:39 pm

      Mr. Goodwin,

      Thank you for your feedback. Best of luck in your trading.

      Regards,
      Michael

Share This

Share This

Share this post with your friends!