An iron condor options strategy in ICICIBANK

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When we talk about successful trading, One thing is most important that is how you are managing your risk? If you are keeping your risk on the limited side then the probability to make money will be high. Options strategies are the best solution to keep our risk limited. Today We will talk about the Iron condor options strategy in ICICIBANK, which is a limited risk strategy.

Before going further, let us talk about what is an Iron Condor options strategy? The iron condor is a Non-directional limited risk option strategy and good to deploy when you are expecting a range-bound activity in a particular script.

Its a combination of Bull Put Spread and A Bear call spread. We are selling OTM (Out of the money) strikes and buying further deep OTM strikes. We will understand this with an example of ICICIBANK.

An iron condor options strategy in ICICIBANK

ICICIBANK chart today

Before we come to our iron condor option strategy, let us look at the chart of ICICIBANK. After a good rally in ICICIBANK, we can see ICICIBANK is consolidating in a range.

For a Non-directional strategy, it is important that a script should be in a range-bound mode. And ICICIBANK is trading as per our requirements. Based on the technicals, the range should be 550 – 515. Lets us look at the Open Interest data for more confirmation.

Open Interest analysis for ICICIBANK

Open interest analysis

Based on Option chain data, the Highest Open interest is at 550 CE and 540 PE. Now if we talk about a range, You can see 500 PE is holding a good Open interest with PCR at 2.99 indications very good support at 500.

Here one question may arise that Highest OI on the PUT side is at 540 then why we are looking at 500 PE?

Here we need a range. You can see ICICIBANK is trading around 530 which is already below 540. Second thing is PCR at 540 PE is 0.85 which indicates a neutral zone. So the highest OI at 540 PUT is acting just as a neutral level and not giving us that wide range which we are looking for an iron condor option strategy.

An iron condor options strategy in ICICIBANK

iron condor options strategy in ICICIBANK

Based on the range we got from technicals and Open interest, We are eating an iron condor by selling 500 PE and 550 CE and buying 480 PE and 570 CE.

Max risk is 16500₹ and return is 11000₹ with breakevens at 492 – 558. Now, what should be our adjustments if ICICIBANK is going beyond our breakevens?

Possible adjustments

The first thing is, hold this strategy till ICICIBANK is trading between 500 -550. You can square off the entire legs once your it is sustaining below your brekevens.

You can follow these adjustments too. Roll down your Call spread to 530 after a breakdown from 500. Same thing you can do with PUT Spread. Roll Up your Put spread to 530 after a successful breakout from 550.

I hope my articles are helping in your profitable trading. If you have any feedback or suggestions please type in the comment box. Your feedback will help me to do something better in the future.

Please type your queries related to this low-risk options strategy in the comment box. I will try to answer all your queries.

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Options Strategies – A Mentorship Program

On the 1st of September 2019, We have launched a new mentorship program for Option strategies, in which we are discussing how can we deploy these strategies? What rules we should follow before taking a trade? and what should be our adjustments if the script is moving against your direction?


DISCLAIMER: – we are not a SEBI research analyst. Views posted here only for educational purposes. There is no liability whatsoever for any loss arising from the use of this product or its contents. This product is not a recommendation to buy or sell, but rather a guideline to interpreting specified analysis methods.  This information should only be used by investors and traders who are aware of the risk inherent in securities trading.

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