Options Trading Strategies: Iron Condors, Straddles and Strangles CAUTION - YouTube

Why I don't like iron condors and iron butterflies. David Jaffee with BestStockStrategy.com

Best Stock Strategy where i earn around a million dollars a year by trading options. You

can go to BestStockStrategy.com, enter in your email address and receive free training that

is better than everyone else's paid training materials. So what an iron

condor and an Iron Butterfly is, is an Iron Butterfly is you're selling a

straddle spreads. For example let's say the let's say Facebook is trading at

like $157 right now you would then sell a put and a call with a strike price of $157.

let's say six weeks out and then you are then also going to BUY (I misspoke) the

wings which are around three dollars below and three dollars above so in this

case you would sell a straddle which means you would sell a put and a call

with a strike price of 157 you would then buy the $154 put and then you would

BUY the $160 call and all of these would have the same expiration date this would

be called an Iron Butterfly an iron Condor would be very similar to that

except instead of selling a straddle you would then sell a strangle so for

example if facebook is trading at 157 let's say you would sell the 154 put you

would sell the 160 call and then you would agree to buy the 150 put and the

164 call. Alright so if Facebook is at 157 you

would then sell the 154 put you would buy the 150 put you would sell the 160

call and you would buy the 164 call that would be an iron Condor which is very

similar to an Iron Butterfly it's just that the butterfly is a straddle spread

and the iron Condor is a strangle spread. So now that we got that stuff out of the

way the point is I don't like any of these strategies for two reasons

then this actually goes into why I don't think that Kirk Du Plessis from option

alpha makes any money because not only is it telling you that you should do

iron butterflies and iron condors but he's also telling you that you should do

do them on ETFs which have about half as much premium as regular underlyings so

you're not gonna make any money by doing these strategies alright and I mean look

you will make some money is better than like buying options because you're not

gambling so yeah if you sell some strangle spreads then your returns will

be like relatively low like maybe you know maybe you'll make like 10 or 15% a

year which isn't that bad I mean it's better than losing money which is what

you're going to do when you day trade or use technical analysis or trade penny

stocks but you're not going to make like a lot of money and it's gonna require

you to have a substantial amount of adjustments and a lot of time and effort

in monitoring your positions so going back to why I don't like these positions

and also this fits into the video that I made of why I don't think that option

alpha and option alpha com why following their strategy is going to make you any

money first off it's a spread I don't like spreads. Trading naked options are

by far your best way because it maximizes the amount of premium that

you receive it's a lot easier to manage those positions and it also inherently

makes it a lot harder for you to trade too many contracts because it reduces

the amount of buying power that you use up for every position that you open so

those are the three main reasons and three primary drivers of wire and always

try to sell naked options as opposed to spreads the second reason is that a lot

of people do these type of strategies on ETFs and indexes which I don't like

doing because the amount of premium that you receive on indexes is about half of

what you would receive on an underlying and look like very huge underlines

like your Facebook which is a $500 billion dollar company and Amazon

you have Apple which is a trillion dollar company you might as well just sell

options on those companies as opposed to using an ETF because you're going to

receive twice as much premium the third reason is I just don't like selling

calls right from my experience and I've made thousands of trades every

single year I can tell you that the likelihood that a call gets challenged

is around three to four times as high as the likelihood of having your foot

challenged now yes if the market turns and we enter a bear market then I will

definitely sell calls and in February of 2018 I made around $100,000 by selling

calls on Amazon and that was great but what I so calls an Amazon right now I

would not especially because Amazon was trading around $1870.

I was considering selling $2150 dollar strike

price calls on Amazon when Amazon was around 2040 or 2050 but I

didn't and actually I don't regret that because I don't think that it was

necessarily a very high probabilistic trade for me the cell calls on Amazon

where it's only where I would choose a strike price only 5% above the current

market price so when Amazon was trading at twenty fifty I did think that it was

getting a little bit expensive but I don't necessarily regret not selling

that 2150 call because even though I would have made money I think I would

have gotten into bad habits so again I don't like selling spreads I don't like

selling calls because my from my experience those calls and a bid and

challenged around three or four times greater likelihood than the puts end up

getting challenged and the third reason why I don't like iron condors and I

definitely don't like butterflies is it requires much more babysitting you're

gonna have to make a lot of adjustments in your account so it's going to

increase the amount of commissions that you pay you're gonna have to log into

your account three or four times a day to make sure that the underlying stock

price is staying relatively close to this to the strike prices that you

choose so a Facebook is trading like in 157 and you're trading an Iron Butterfly

you have to make sure that facebook doesn't fall to like 150 - or that it

doesn't trade up to like 165 because then you're gonna lose money so yeah I

understand like the whole argument about hey I'm gonna sell in I own butterfly

and then I'm gonna treat I'm gonna close it out at 25 percent profit but I mean

first of all that's complete bullshit because even if you do do that

not really making that much money for being compensated for your risk because

if you're selling an ETF you're automatically receiving less premium and

you're trading a spread which minimizes the amount of premium because you're

buying the wings and you're essentially throwing money out in order to reduce

your buying power for capital efficiency and you're going to tell yourself that

it's going to reduce your risk but we all know that the reality is that

selling verticals is a lot more risky than selling naked position so if you're

going to have the ETF aspect eating to the premium that you receive and you're

selling spread so you're gonna have the further out wings that you're buying eat

into your profitability and you're only collecting 25% because you're closing

out your trays at 25% profit how much money is there right and some of those

traits are gonna be losers so you have to factor that into the equation and

you're gonna have to adjust those positions you're gonna have to pay

commissions etc and eventually you're just gonna spend a lot of time and

twiddle your thumbs and have a lot of anxiety but a lot of those trades are

gonna end up being losers so this is why I don't like selling iron condors and

iron butterflies and this is my main criticism of Kirk Du Plessis at option alpha

I think that his videos are really well made. I know that he's been

doing this for around eight or ten years and I've been doing it for like eight or

ten months so I can't like hold a candle to his name recognition but as far as my

returns and whether I'm a better trader than him. I am 100% certain and that I am a better trader than him and that I teach better information than him but it's

just that his production value is substantially higher than mine because

he's been doing it for a lot longer so if you have any questions let me know

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