Expected Market Volatility During 2019 Could Spell Trouble for “Iron Condor” Investors

The “iron condor” is an extraordinarily complex investment product. A form of “yield enhancement strategy,” or “YES,” it involves making at least four separate options trades with the hope that none of the options will actually reach their strike price so that the investor can pocket a modest “option premium.” With an iron condor, the investor is betting that the market (more specifically, the S&P 500 index) will remain fairly constant over a set period of time, neither spiking nor falling suddenly. The problem with this is twofold: (i) the stock market spikes and falls all the time, and (ii) these sudden fluctuations are inherently unpredictable. This, combined with the fact that the options purchased with an iron condor investment simply disappear if they aren’t exercised, means that investors stand to suffer significant losses if and when the market moves either up or down. Experts Disagree With Wall Street on Where…

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