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How Iron Condor and Strangle Options Differ
Options trading can be a great tool for minimizing risk and increasing profit potential when properly utilized. Two of the most popular options trading strategies are the Iron Condor and the Strangle. But what are the differences between the two?
Volatility
The Iron Condor strategy is generally used in periods where the volatility is low, while the Strangle strategy works best during times of higher volatility. In this sense one strategy is inherently more conservative and risk averse than the other.
Risk Management
In the Iron Condor strategy, the good news is that the risk of loss is considerably reduced, as much of it is outsourced. In the Strangle strategy, however, the risk profile is much higher, and although the potential for profit is much higher than the Iron Condor, so too is the potential for loss.
Profit Potential
By and large the Iron Condor option strategy offers much lower short-term returns than the Strangle option strategy. The subsequent higher volatility of the Strangle option strategy offers the potential for bigger, more lucrative profits in the short and medium-term.
Return On Investment (ROI)
The Iron Condor option strategy offers relatively low risk and low, but consistent returns on investments. Contrastingly, the Strangle option strategy offers much higher potential, however, with higher risk – but the potential to realize higher profits nonetheless.
Buy & Write vs. Covered Call vs. Put Spreads
The Iron Condor stock strategy is part of a wider strategy known as a Buy & Write. This is when you buy a stock and then sell a call option on it. Covered Call options are used in the Iron Condor strategy, while Strangle options involve Put Spreads. Both strategies have their own merits in terms of profit potential, risk management and ROI.
MarketXLS: Helping Make The Right Investment Decisions
MarketXLS provides the tools for investors to make the right investment decisions. Registered users can leverage built in financial functions to backtest strategies such as the Iron Condor and Strangle options for reliable backtesting. MarketXLS also allows you to stay informed with streaming data, portfolios, and alerts. By keeping informed on the latest stock options, investors can make the most informed decisions.
MarketXLS helps investors save time, follow stocks more effectively by minimizing errors, and make more money through smarter decisions. With a comprehensive suite of features, MarketXLS helps anyone become a better trader.
Here are some templates that you can use to create your own models
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Relevant blogs that you can read to learn more about the topic
