Iron Condor vs Iron Butterfly

do not ever ever ever trade the stupid idiotic options trading strategy which one am i referring to here stay tuned to find out [Music] hey what's goin on I mean Haddad unconventional trailer where I help options traders generate an income without picking stocks so if this concert sounds good to you hit the subscribe button right now and I promise good things will come your way so in this video I'm gonna be discussing two of the most popular options trading strategies and that is the iron Condor versus the Iron Butterfly so which one is the best and which one should you use I'm gonna answer both questions in this video now if you've been following me for a while you probably already know that I am heavily biased towards the iron Condor for many good reasons not only that by but I also completely hate the he Iron Butterfly so much for suspense right so there you go this there is your answer but I'm gonna try to be very objective here so I'm gonna try to stay calm stays in and keep the emotions out of it now I'm gonna break down the iron Condor in terms of pros and cons and what I like about it and what I dislike about it and I'm gonna do the same thing for the Iron Butterfly so let's start with the I encounter first there are many reasons why I like the I encounter but the main reason the number one reason why I love the iron Condor is simply because of the extremely wide range of profit so if you're by the way I'm I'm talking about the short iron Condor and short on better fly obviously now if you've traded the an iron Condor before you already probably know what the picture looks like so the way we set up an iron Condor is usually we go way too far out of the money in order to have a very wide range of profit potential and I mean really really wide so this is the main reason why I love I encounters now the the number one reason why I dislike the iron Condor is simply because the the risk reward might not be the best out there and what I mean by that is the premium you collect from the market might not be very large or very good compared to the amount of margin required on your site to in that position so that's the main reason why I dislike the iron condor but here's the deal most traders out there unfortunately they define the risk/reward in a very wrong way and in a conventional way and it's something that I call in a two dimensional way so basically they define it as how much I am risking versus how much I'm making and again this is a two dimensional way but risk reward is so much more than that the way I define risk reward and an unconventional way it goes something like this how much I'm risking versus how much I'm making versus the probability of making this profit because the probability of profit plays a huge role in the success of the trade and the number one secret to making consistent profits every single month is having high probability of profit trades so again the way we define risk rewards is more of a three dimensional way it's how much I'm risking versus how much I'm making versus the probability of making this profit so in the in the case of the AIA the iron Condor risk reward in this particular way is so much worth it I don't care that I'm putting way too much margin from my side in order to collect so little premium the the good thing is that the probability of collecting this premium and keeping it as a profit is so much higher and I would trade an iron Condor every single month in fact my ultimate strategy course is based on an iron Condor so this should tell you how much I really love the iron Condor now let's move on to the Iron Butterfly and again I'm gonna try to stay objective here and keep the emotions out of it so let's start first with the things that I like about the Iron Butterfly nothing there's really absolutely nothing that I like about the Iron Butterfly this is possibly one of the most idiotic stupidest action strategies out there and for for many reasons but I'm gonna cover four main reasons why I hate the iron barfly the number one reason why I hate the Iron Butterfly is simply because of the extremely narrow range of profit again if you're trading traded an Iron Butterfly before you probably already know what it looks like you know the shape of the triangle so you again you already know that the pretty the range for the movement for the underlying asset is extremely limited so remember usually when we sell options the main reason why we sell options is to have a very high probability of profit so when selling options you make a profit if the stock goes down or goes up or stays neutral obviously if it moves within a certain range so with the iron Condor this range is extremely wide but with the Iron Butterfly you negated the the benefits of selling options because you have limited the range of movement in the underlying asset so this is the number one reason why I really hate the Iron Butterfly now the second reason is usually most traders when they trade an Iron Butterfly is they set up the position exactly add the money and so they're assuming that the underlying asset will never move in any direction but this is obviously wrong and they probably know this already and so in return they will end up adjusting the position way too soon and way too frequently so this is this is a no-no for me it makes no absolutely no sense why I would trade an Iron Butterfly add the money and so even if I set up the position directionally in other words if I skew the the Iron Butterfly either to the upside or to the downside making it a bullish or bearish again it doesn't make any sense if I have some directional bias and on that particular asset then I would simply either buy a call or buy a put without limiting my profit potential and so it doesn't really make any sense to trade an Iron Butterfly in that particular case now I know some of you might say that Namir the Iron Butterfly gives you so much premium with so little risk and I'll tell you I hear you I love you I think you're beautiful but I also want to ask you the following when exactly can you realize this maximum profit of the Iron Butterfly right it is only when the underlying asset lands exactly at the short strike price at expiration so what are the chances of this happening it's almost zero right not only that but no one can expect that it's just insanity to try to predict that and so again it doesn't make any sense to trade an Iron Butterfly even though that the the premium you collect is so much higher compared to an iron Condor but remember you only get to keep the maximum profit potential of this trade only when the underlying asset lands exactly at the short strike price which is impossible not only that but also at expiration but again I know some of you might tell me but I mean you don't have to wait till expiration to realize the profit and I know this is true but here's the deal let's say after two weeks you decided that you want to take some profits off the table now after two weeks it is almost impossible that the stock or the underlying asset will will still be at the same level when you initiate the trade in the first place so let's assume that it's it's gone up in price the problem is if it moves up and due to the nature of the position of the shape of the position when it moves up its going to move closer to your break-even point and so guess what even if you waited for two weeks to take some profits off the table this is actually not a profit you you almost broke even or you simply made very little profit and so this is the fourth reason why I hate this strategy it is because with minimal movement and the underlying asset you're not going to be making that much of a profit you're simply gonna be either breaking even or collecting very little profits and so those were the four main reasons why I hate the Iron Butterfly and by the way I really tried to be objective here this is not my my anger at this strategy I was I was very objective here and I was approaching it and in just common sense so this is simply common sense it doesn't take a genius to figure out that the very narrow range of profit doesn't make any sense but do you know what really drives me angry and crazy is the amount of misinformation out there because I actually typed in on YouTube I encountered versus Iron Butterfly and there are a lot of videos out there obviously I didn't watch all of them but I watch a lot of them and unfortunately all of the videos that I watch they always tell you to go for the Iron Butterfly and this just drove me insane and crazy I I don't know I mean it doesn't make any sense none of those videos made any sense and again they were training any conventional academic way of trading that is the risk reward thing they collect so much premium and this high high premium gives them room enough room to for the adjustment and again this doesn't make any sense why would you start a trade and after two days start adjusting right it doesn't take a genius to figure out that the Iron Butterfly is a stupid strategy and you should always opt in for the iron Condor and so if you want to learn more about unconventional trading then make sure to click the link in the description below where I show you how to get a guaranteed profit in two days or less it's a very unconventional trade and something I call the free lunch system again it's a free video but make sure to click it right now because who knows I might remove this video at any time and so if you liked this video and found it helpful please give it a thumbs up I'd really appreciate it and also make sure to subscribe to the channel and also hit the notification bill so you'll be notified when I post a new videos and as always trade safely smartly and successfully

Channel: Options Tycoon

Views: 28,614

Rating: 4.5963302 out of 5

Keywords: iron condor, iron butterfly, iron condor vs iron butterfly, iron butterfly vs iron condor, options trading strategies, options trading, nameer haddad, options tycoon, optionstycoon, best options trading strategy, short iron condor, short iron butterfly, iron condor strategy, iron butterfly strategy, #TeamTycoon, how to trade iron condor, how to trade iron butterfly

Id: lRwCL5NpEq8

Length: 10min 5sec (605 seconds)

Published: Tue Nov 06 2018