Spread Trading
I’m Meta Matt, Director of Education and welcome to PB University LITE! This is a 50 Class Trading 101 Series geared towards both new and veteran traders alike! We go over everything from Trading Psychology, Technical Analysis, and Options Trading to Commodity Trading, Forex, and more!! This 50 Class series is not designed be taken in order, it is instead designed for traders to browse and pick which classes interest them. I will include the list of classes at the bottom of this page.
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An iron condor is an options trading strategy that involves selling two options (a call and a put) at different strike prices and simultaneously buying two other options (a call and a put) at different strike prices that are further out of the money.
The idea behind this strategy is to create a limited risk and limited reward trade where the trader will make a profit if the stock remains within a certain price range.
This creates a "condor" shape on the options chain.
Here's how it works. The trader sells a call option and a put option with the same expiration date. The call option has a higher strike price, and the put option has a lower strike price.
At the same time, the trader buys a call option and a put option with the same expiration date but with a strike price that is further out of the money. The call option has a higher strike price and the put option has a lower strike price.
The sale of the call and put options generates income for the trader via premiums, which can be used to offset the cost of buying the two further out-of-the-money options. If the stock price remains within the range defined by the two options the trader SOLD, the trader will make a profit from the options premium collected. However, if the stock price moves too far in either direction, the trader may face a loss. However, the losses are limited because the two options BOUGHT will offset the loss from the two options SOLD.
On the other hand, if the stock price remains within the defined range, the trader will make a profit, but the profit will be limited because the trader only collects the options premium.
So let's say a stock XYZ is trading at $100 and a trader believes that the stock price will not move much in either direction over the next month. They decide to implement an iron condor strategy using options with a strike price of $95 and $105, expiring in one month. The trader sells a $95 put option and a $105 call option. Then, they buy a $90 put option and a $110 call option. In this scenario, the trader will make a profit if the stock price remains between $95 and $105 at the expiration of the options.
If the stock price goes above $105 or below $95, the trader may face a loss, but their potential losses are limited due to the options they have bought.
PB University LITE Class List
1) Trading Terminology
2) Stock Market Indices
3) Common, Preferred, and Penny Stocks
4) Diversification of Assets
5) Fundamental Analysis Made Easy
6) Technical Analysis Made Easy
7) Risk Management In The Market
8) Portfolio Management
9) How To Follow Market News
10) Trading Psychology
11) Options Explained
12) The Greeks In Options Trading
13) How To Short Sell Options
14) Covered CALLS
15) Spread Trading
16) Online Brokers for Options Trading
17) Implied Volatility Calculators & Tools
18) Protective PUTS
19) Iron Condors
20) Straddles
21) Reading Level 2
22) Taxes
23) Trading Psychology Techniques
24) The Art Of Trading
25) Becoming A Jedi In The Stock Market
26) Futures Trading Explained
27) Commodity Trading 101
28) Regulatory Environments
29) How To Become A Millionaire
30) $100K In 100 Days
31) Wash Sale Rule
32) Behavioral Finance Part 1
33) Behavioral Finance Part 2
34) 5 Charting Indicators
35) Fair Value Gap
36) Insider Trading and Market Manipulation
37) Stock Chart Types
38) Moving Averages 101
39) Base vs Precious Metals
40) Electricity Trading 101
41) Trading Brokers 101
42) 5 Trading Strategies
43) 85% Trading Rule
44) Are Win Rates A Scam?
45) Futures Trading 101
46) ATR Indicator Strategy With The Greeks
47) MACD Indicator 101
48) Bollinger Bands Indicator 101
49) Wedges, Triangles, Flags and Pennants
50) RSI Divergence 101
