If you can close out one side of your iron condor spread for 5 cents then do it! Do not take the chance of the market turning around and increasing the price of those options. You have got all the "good" out of those spreads-- time to close. In fact, if I trade an index iron condor, I'm looking to close out any spreads at 20 cents. (that's just me) On the other hand if you're at your profit target, maybe 50% to 60% of your initial credit, then take the whole thing off. (or go into a "profit protect mode"- do not end up losing money on the trade!). hope this helps
in my experience, i think it's best to open condors, strangles, straddles at once and close them at once. it's tempting to do one leg at a time, but my view is that you put the work into analysing the scenario and choosing the options, that's the core of the trade. when you start trying to get fancy, then you're moving away from what the trade should be about.
Certainly, some of the responses are good, but I have seen considerable moves after closing out such a trade. Although Think or Swim offers the commission free close of the .05 option buy back, most brokers do not. One might consider closing the short side only, if the value of the long side is very small. This cuts the cost of commissions and allows you the opportunity to profit when the price reverses. The closer you are to expiration, the better this works. It is nice to profit on both sides of the trade.
I've written a tool to back test iron condors on the RUT. I have a test that attempts to leg out, and my preliminary data shows that it is better to leg out of a bad spread and keep the good one to recoup losses. Of course, this depends on the width of the spread, and if you have another trade you need to free up the margin, also the value of the other side (if its 0.05, close'r out)
Toby (assuming you are selling premium): you hope that the underlying stays relatively flat after putting the trade on. With a low IV underlying, the credits you receive will be low plus you are more susceptible to an increase in VOL which will hurt you.
Assuming no earnings or potential binary news events, the best scenario for condors is to put your trade on when the IV for the underlying is greater than average (relative to itself over some defined lookback period -eg. past 6 or 12 months).
For example XYZ has an average VOL of 20 over the past year. Now, the IV is 35. That what be a good time to sell premium (Iron Condors, butterflies etc). Hoping for relatively flat price movement and a reversion to the mean in volatility. Collect theta and you will be happy in this idealized scenario
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I think this also depends on the time remaining until expiration. If there is a few days left (let's say 2 to 3 days) I wouldn't bother closing such leg as it is unlikely that the stock or index would turn that fast, considering you are selling 10 Delta on call and less than Delta 18 on put side. If there are more days left i.e. week or more, than definitely I close such leg.
If it happens that both legs are close to nothing worth then yes take it all off.
My account is very small so I cannot trade more contracts so I have to play it until the very end and shoot for expiration. Buying back my 1 or 2 contracts wouldn't make me much left.
My personal approach is to close the spreads separately, but with orders entered at the same time. I've found that my condor exits on the RUT and SPX can sit for a while, but if I enter orders to exit the call spread and put spread separately (but within a few seconds of each other) the condor is closed down more quickly and typically at a little better pricing.
I enter these orders only after I'm above my profit target and in a time of sideways action during the day...you don't want to try this type of exit in a trending or volatile period of the day. I also use this same approach for entering my condors.