Startups, entrepreneur and large businesses alike use nametags for promotions of their business or brand. It is a marketing strategy. Nametags embark an impression on one’s mind and stay there, this way their brand stays in everyone’s mind. These nametags are used during the conference, sponsor events, charity events or in fact, any event related to the brand. It gives them a source of marketing and a source of advertisement to show people what their brand is about and how their employees are there to help them at all time.
Like nametags, a large number of strategies help companies and startups market their brand or invest money in other companies. Some strategies give you a profit there and then, other give you a huge profit, but at the same time, the risk of losing a large amount of money is also there. If you are a startup and want to establish your brand in the market, you can work on a strategy that helps you earn money, but more than that helps you keep the risks of losing money away.
One of the strategies in which the risk of losing a large amount of money is small is “iron condor.” Even though you don’t earn as much as you do with other strategies but this strategy is safe. You play safe using iron condors.
The basic construction of iron condors:
This strategy has gained a lot of popularity due to the high probability of success in it. The basic construction of this strategy consists of combinations of put and call spread. You have two put spreads and two-call spread. One is lower put and lower call, the other is higher put and higher call. The construction is as follows:
- Selling one out of the money put
- Buying one out of the money put which is at a lower price
- Selling one out of the money call
- Buying one out of the money call which is at lower price
This way you provide padding for safety on both sides. Even if the price of share increases or decreases out of the range, you are safe due to the padding you have provided in the shape of puts and calls. This is the reason there is the very low probability of losing money. You always make more money than you lose.
Parameters of trading:
Before you start implementing iron condors, you should remember a few parameters. One is how much time to go on. On average, it is seen that most people stay between three to ten days but the maximum you can go to three weeks. This strategy basically turns the time decay in your favor. You can earn 5% profit in a week and 10% in a month. Of course, 5% in a week is better, but in a short period like this, you have a chance of losing more money rather than by earning 10% in a month. Even though the earning is low, you earn more than you lose.
The other parameter is how far out of the money you should go. If you keep your range large, you will earn very less, but if you keep your range small, there is a very high probability that the share price will kick off and you will lose more money. There is always an inverse proportionality in between the reward you get and the probability of success. If you want to earn more the probability of success is less. If you earn a little and go steady the probability of success is way more.
If you want to play safe, iron condors are the strategy for you. It has been seen by research that iron condors strategy has given more return that loss. As the cliché says, “Slow and steady wins the race,” implementing this strategy will do more good than bad as it prevents the loss of large amounts of money.