Markets have officially gotten sloppy and somewhat range-bound, which means that for charts with less implied volatility, we can look to iron condors to extract money from the market via time or theta decay as prices chop within a range. 

Let's take a look at one of these low volatility stocks – the SPDR oil services ETF $OIH – to set up a trade with a short iron condor.

The premise of the trade is the following – we will sell a short call spread and a short put spread for a credit which pays us first but holds margin in our account while the position loses value. When we sell spreads, we are anticipating that we are able to buy them back cheaper for a profit. 

Trade structure – the short iron condor 

• Sell to open 1 OIH 18 OCT 300 calls 
• Buy to open 1 OIH 18 OCT 305 calls 
• Sell to open 1 OIH 18 OCT 265 puts 
• Buy to open 1 OIH 18 OCT 260 puts 

The credit we can collect here is $2.35.

Different to a long position, the short position has a risk event that is calculated in the following way- 

1. The distance between the two call spreads (305 minus 300 = $5) or the distance between the two put spreads (also $5 here) but you can design them anyway you like. This defines the total risk.
2. We collect a credit that lowers this risk ($5 minus $2.35 = $2.650, which defines the total risk we accept if the stock tests and hold either of the long strikes in question. 
3. The breakeven prices are as follows: $302.35 on the call side and $262.65 on the put side. 
4. The goal will be to collect 50% of the collected amount or we sell the position with about 18 days before expiration if the stock begins to move around near the edges 

The strategy result provides three choices to exit the trade. 

1. To sell the position once the 50% profit (or whatever profit you deem acceptable) is achieved.
2. To buy back the short iron condor spread once it hits your loss threshold as determined by personal risk – this will happen with extreme movement. 
3. To buy back the short iron condor with 18-21 days before expiration. If all is going well and you have decided to hold the trade closer to the end of expiration, consider at least taking some of the position off as risks tend to rise the closer we are to expiration. (I have had many a trade go sideways taking it down to the wire and not capturing gains, so I do not advise this).

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