One of the biggest mistakes that a new Options trader will make is to assume that credit spread/iron condor trades take care of themselves. Since our business model in this trade is that of an Insurance Company, that’s like selling homeowner insurance policies in Key West without factoring in hurricanes. We need to know well ahead of time….at what point does the position no longer make sense? When this occurs, based on our pre-determined limits, we close down the trade and “roll” it further out in distance, and usually time as well. Since “expansion” of the charts leads eventually to “contraction”, this adjustment almost always gives us the room that we need to absorb the attack. Manage your risk!
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