One of the ways that you may want to or reasons why you may want to create an unbalanced iron condor is because if the stock keeps heading higher you might want to be a little more bullish or if the stock’s heading lower you might want to be a little bearish.
As you look at Iron Condors, they are typically balanced to start out with but if you have some stocks that are just really good and just keep going up and you’re always getting in trouble let’s say on the right side then you might want to be a little more bullish or skew that iron condor to be a little more unbalanced.
Let’s look at Shopify and how i could create this unbalance.
I could continue heading higher or lower but I’m just going to do the higher example because that’s what most people are typically doing or usually have a market that keeps trending to the upside.
So here’s my basic Iron Condor that is balance.
[Image 1:55]
Widen the Put Side
One of the ways to go in and make it a little more bullish is; so I’ve got a duplicate trade what I can do is go in and widen the put side so if you look at the distance I’ve got the put side at 1100 and 1080 is my protection.
What I can do is buy my protection at 1075 which is not traded so 1070 and now you can see it’s unbalanced so this side has popped higher this side has popped lower.
Now, if you run the line across you can see one is higher and one is lower and that’s just creating unbalanced. I’m using the same contracts but I’m unbalancing it with the actual strike.
So here I can go to the 1060 or I could even go to the 1050 and you can see it’s more and more on balance.
It’s making it even more more bullish and that’s kind of one way of doing it.
Okay, let’s look at another way of doing it; let’s say I’m starting back out with my Iron Condor so how else can I do this well what I can do is change it to a custom position.
Increase Number of Puts
And now I can increase the number of puts.
What you’ll notice is as I increase the number of puts let’s go to 20 and now I’ve got an unbalanced iron condor so I can keep the distance on the strikes the same but I’m just increasing the contracts on the left side here which is the put side.
Can i do a combination of this?
Yes you can. I could widen the strikes and increase the puts and now I’ve got both so now I’ve got a difference in the distance.
So the put side’s got a bigger difference and I’ve also got a difference on the contract numbers so that can also make it more bullish and unbalanced.
Move the Put in Tighter
The other way that I can do is I’m going to show you these a couple of ways and the other way that I can do is to go in at least from a simple way and just to move the puts in tighter.
By moving the puts in tighter what’s it’s going to do is make it higher or stronger delta and that’ll push that line over so I can do and bring it in about let’s go 1140 and then we’ll keep the distance the same.
That way the distance is not impacted and that 20 point difference. Now I’ve got 1120 as you can see it brings it in so it increases that delta.
I could keep doing this so what I’m doing now is let’s go to the 1200 and now I’ll go to the 1180.
Now you can see it’s unbalanced but it’s not necessarily unbalanced from the capital standpoint, it’s unbalanced on the delta side.
Some books would say it’s balanced but in my opinion it is unbalanced because the Delta is stronger on the right side that on the left.
Now, I’ve got a much stronger put side than I do on the call side and I could also move the call side to make it go wider and that would increase or decrease the strength of them and make it even more unbalanced or more bullish.
