One technique that I find even more effective than that one is closing the Iron Condors by steps. This way you break your Iron Condor into two verticals spreads, and you enter two closing pending limit orders, one for each vertical at your desired price.
As usual let's go with the numbers to make it easier:
Let's say INDEX abc is trading at 100, and I enter an Iron Condor using the following strike prices 80, 85, 115, 120.
BUY 1 abc 80 PUT @ 1.00 (-$100)
SELL 1 abc 85 PUT @ 2.00 (+$200)
SELL 1 abc 115 CALL @ 2.00 (+$200)
BUY 1 abc 120 CALL @ 1.00 (-$100)
CREDIT RECEIVED: $200
MAXIMUM RISK: $300
Every Iron Condor is composed of two verticals: a Bull Put Spread and a Bear Call Spread
As you may have surmised at this point, the Bull Put spread in this case is the position formed by the 80 - 85 PUTS, while the Bear Call Spread is the position formed by the 115 - 120 CALLS.
Each one of these vertical spreads is giving a credit of 1.00 point or $100. As a trader, you want to close each vertical for a debit lower than that credit. If you could close each vertical for 0.80 ($80), you are making a 0.20 ($20) profit on each one. In this case that means 0.40 ($40) for the whole initial Iron Condor. $40 on an Initial Risk of $300 means a 13% return.
So you enter two limit orders God Till Canceled as follows:
First limit order for a debit of 0.80 (We don't care about individual price of each option, only about the total for which you want to close the whole vertical)
SELL 1 abc 80 PUT
BUY 1 abc 85 PUT
Second limit order for a debit of 0.80
BUY 1 abc 115 CALL
SELL 1 abc 120 CALL
And that's it folks!! One order will eventually get triggered before the other, it doesn't have to be the same day. If abc goes up, chances are your Bull Put Vertical will be automatically closed for a profit and viceversa, after that, the other order remains alive until the market pulls back or volatility skews change till the whole position is closed. If you want a return better than 13%, you try to lower the debit in your closing orders, let's say instead of 0.80 you would aim for 0.75, or 0.70, or whatever.
I think this technique is superior. It is easier for a vertical to hit your closing price than for a whole Iron Condor which is made up of not 2 but 4 options. I think it also responds better to market swings and works better in keeping you out of trouble as soon as possible.
Stay tuned for the next one! I will be talking about long term investments, plus some Forex Strategies I have been able to automate. I will share back testing results and the source code as well.
Remember, to always do your own homework :)