Traders who like to write iron condors -- the options strategies where, as Investopedia puts it, you buy and hold four different options with different strike prices --should be on the lookout for different ways to setup these types of trades.
Whenever I see a widening of the volatility bands, I try to determine a bullish or bearish assumption of the stock and write a condor in that direction.
One of the ways this can be accomplished is by writing a lopsided or stacked on one side type trade.
Take UNG (NYSE:UNG) for example. The chart below and corresponding option table will show the numbers for reference. A regular iron condor might look something like this with the ETF at 24.98 using the March options:
March 22 2014 26/27||21/20 for a $.16 cent credit.
However after looking the chart and bands, a trader may have a bearish bias on this ETF.
Setting up a bearish iron condor by stacking the upside would look something like this:
March 22 2014 26/30||21/20 for a $.40 cent credit.
The short 26 call has a only a 20 percent chance of being the money, while the short 21 put has only a 17 percent chance according, to current option pricing as seen on the table.
A trader would look for the stock or ETF to drift to the lower put spread on the bearish play.
Keep in mind that you are increasing your risk on the upside by widening the strikes to get more premium, but after all you are bearish on this trade.
March Option Table:
You can change the strike distances to define your risk preferences before you place the trade, experiment with different strikes to see what might work best for you and your portfolio.
(Chart and option table courtesy of Think or Swim)
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