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Exiting a Short Iron Condor - a Word of Advice for a Noob?

  • Last Updated:
  • Apr 15th, 2020 6:27 pm
[OP]
Newbie
Apr 14, 2020
1 posts

Exiting a Short Iron Condor - a Word of Advice for a Noob?

How are you guys, I hope everyone is keeping safe here.

Have a novice question here. My short IC is about 1.5 STDEVs OTM on both wings. One wing went into good profit and the other understandably got a bit more expensive. Overall the position is still profitable, but not by a lot yet. RSI/Stoch suggest a reversal. IV percentile is quite high and trending down.

So the question is - should I use the opportunity now to sell the profitable wing to lock in at least some profit, turn the IC into a vertical spread and then work with the time decay, IV drop and time a reversal to close it? Or is it not recommended?

What would the gurus do?

Many thanks!!!
1 reply
Sr. Member
Mar 13, 2009
698 posts
163 upvotes
Maple
It is always a good idea to book gains on a winning side in case the underlying reverses. My rule of thumb is around 20%. So if I sold the spread for $1 each ($2 total for the IC), I will place a GTC order to close each side for 0.20. tastytrade recommends 50% (so 0.50 in this case), but I believe it's too much. If the underlying continues the same direction, the winning side still provides some protection. But at 20%, you already milked most of the winning trade, leave the last few nickels to someone else.

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