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FAQ:
Why only a few people are writing Iron Condor?
- Most people don't know of or understand this strategy
- Always think all options as high risk
- Some are greedy and think this strategy only has limited potential
- This may be considered to be capital intensive
Why do we only recommend cash-settle index options?
With cash-settle index options, our risk is limited to the maintenance margin required to open the positions.
When an index option is exercised by its holder the day before expiration (Euro style), and when an index option writer is assigned, cash simply changes hands only. There is no margin call like stock when it get assigned.
At the end of expiration, depending on the settle price, your account will be debited or credited automatically. Most of the time the options will be expired worthless, so we can keep the entire premium received.
How much margin is required per Iron Condor?
As the difference in strike price we typically deal with is 10, the maintenance margin is $1,000 per one Iron Condor contract. Iron Condor consists of one bull put credit spread and one bear call credit spread. You can first initiate either credit spread with maintenance margin of $1,000 per one contract, but another does not require any additional maintenance margin under the same underlying security. This is because when expiration comes, options friendly broker knows that the settle price will just be one price.
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