tell me about spreads/condors...

[twinstar]

Ok, my first post so go easy on me.

I want to sell an iron condor on the SPX. I pick my 4 legs and get a credit, lets say the credit is $5.00. At least that's what I see as far as the 'price' of the iron condor. I have 2 questions about this.

1. When the condor goes off to the CBOE, does it have to match with a single buyer (someone buying the reverse of what I'm selling), or would they possibly make a match per leg even (meaning there could be 4 buyers/sellers on the other side of the trade, one for each leg)?

2. All I see relating to the prices is a $5.00 credit like I said. Are the leg prices set to fixed amounts that I don't see, or are they allowed to move as long as I get a $5.00 credit when it's over (A limit order of course!) So if my order sits for a long time and then I see the mark on my condor would currently be $5.25, but the underlying leg prices are no longer in the same ranges as when I sent the order, so it doesn't get filled. I hope this one makes sense. I will try to elaborate if it doesn't! - this would also relate to spread orders...

Thanks guys/gals - I'm already learning so much - there is a wealth of knowledge on this site!

tw

 

[krylite]

probably easier to look at it as two separate deep in the money vertical spreads. and open, roll or close them accordingly.

 

[twinstar]

probably easier to look at it as two separate deep in the money vertical spreads. and open, roll or close them accordingly.

What I am trying to understand is how they get filled on the other side. Another way to ask would be what you said. Would 2 spreads get filled differently than an iron condor? In one respect I understand that there would be less legs required per spread. But to simplify it more. Can a spread be filled by two bids? One for each leg? Or does it have to be filled by one person essentially 'buying' the spread your selling. I imagine this concept would scale for condors as well.

 

[krylite]

Well, for example in ThinkOrSwim, you can put the whole iron condor with 4 legs on order. But it may be the case each of your legs or just two of them will be filled by different market participants or market makers.

But sure, a spread can be done separately with two orders or at once. When you do them at once, it's likely both orders will appear close to the same time on the exchange. I just learned it was easier to manage an iron condor as two separate verticals , one on each side then putting it all on at once and then trying to take it all off at once. As long as each leg has decent bid/ask volume on the option chain, it should be not be a big problem to get filled.

Your particular trading platform should allow this type of order separation or combination. I don't quite think it's likely some participant is taking your whole condor as a trade. I think it's mostly by single legs i.e. single puts or calls, and now done mostly electronically.

 

[wino59]

What I am trying to understand is how they get filled on the other side. Another way to ask would be what you said. Would 2 spreads get filled differently than an iron condor? In one respect I understand that there would be less legs required per spread. But to simplify it more. Can a spread be filled by two bids? One for each leg? Or does it have to be filled by one person essentially 'buying' the spread your selling. I imagine this concept would scale for condors as well.

The only thing that matters is it gets filled, at the credit you want. Whether it is 4 separate buyers or 1 buyer, shouldn't matter. The guy that buys it may hold it for day and sell it back, or sell a leg, so whomever buys it, or how ever it gets filled should be of little relevance, Unless you are not getting filled at the price you want, in a reasonable amount of time, then it is probably a broker issue, and you should look for a new one.

 

[Philip Hughes]

Hi, guys this is first time i am visiting this forum. Its glad to see such a great info posted here. So many things i came to know new by this forum.

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