What's to stop me from selling Iron Condors one day before expiration?

External question — Personal Finance Stack Exchange Author: cardycakes Original post: https://money.stackexchange.com/questions/132364 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. AAPL is currently trading at ~115. I can construct the following Iron Condor that expires tomorrow . It has close to a 1:1 R/R ratio: BUY APPL 121 CALL SELL AAPL 120 CALL SELL AAPL 110 PUT BUY AAPL 109 PUT If the stock has been range trading, there are no new events coming, and volatility makes it unlikely to move more than 5 points in 1 day then I ask: Where can this go wrong? What am I missing?

External answer — Personal Finance Stack Exchange Author: Bob Baerker Original post: https://money.stackexchange.com/a/132367 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. Some brokers present the midpoint as current price and that is a misrepresentation. I doubt that you can achieve a 1:1 R/R ratio if you are using the respective bid and ask prices. Be that as it may, this is a high probability trade for a small profit. Where can this really go wrong? AAPL moves almost 5 points and you think that your short option is going to expire worthless. AAPL then moves a bit more during after hours and you're now ITM and you are assigned. Unfortunately, your protective leg has expired and Monday morning you have directional exposure since you're now long (or short) the shares.

External answer — Personal Finance Stack Exchange Author: Aganju Original post: https://money.stackexchange.com/a/132405 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. I have been doing this for some months, every week, and it works fine - until it doesn't. One sudden surprise movement of a stock will cost you what you made in ten successful deals. Basically, you are playing a version of a reverse lottery : take as many tickets as you want, each comes with a dollar you can keep, and if you have the losing ticket, you pay a huge sum.

External answer — Personal Finance Stack Exchange Author: Joe Original post: https://money.stackexchange.com/a/132407 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. Where can this go wrong? Tim Cook announces he has pancreatic cancer and is stepping down. (When Jobs did that, as the link notes, the stock dropped 6% - precisely enough to be at the worst loss point for this trade, if it happened from 115 to 109.) Or, perhaps in the actual real world example... Apple stock drops from 115 to 108 on 10/30/2020 , due to disappointing, if unsurprising, earnings . 5%-6% is just not that much for a stock to move in one day. Yes, it won't do that often, but it will happen.

External answer — Personal Finance Stack Exchange Author: Anthony Indovina Original post: https://money.stackexchange.com/a/153020 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. I have done this strategy and it's best to get out before 3pm eastern time. You leave some theta on the table, and there is some slippage as described above, but it avoids a lot of robot madness into the close. Also, it gets gnarly more than I thought it would. It does work, but about one out of 5 times you have to "manage" the iron condor throughout the day.