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Now that Apple (NASDAQ:AAPL) has experienced a huge run-up over the last couple of months, and a huge intra-day reversal on Feb. 15, it could be an ideal time for an iron condor trade. Why? Because there are many reasons to believe that Apple, like every stock, needs time to digest its 25% move to the upside and has settled into a trading range between 450 and 530. If you share that belief, it will be difficult to earn short-term profits via a traditional directional trade. And it's that exact environment where an iron condor trade shines.

Most simply (and you can skip this part if you already trade iron condors), an iron condor combines a bull put spread and a bear call spread. Both spreads provide a net credit that defines your maximum gain. Your maximum loss is equal to the spread between the two put strikes (or two call strikes) minus the net premium received.

The key to success is choosing "condor wings" that are distant enough from the current price that the chances of either short strike being hit are slim. The Greeks that I use to help calculate the odds of success are the Delta numbers. I focus on Deltas around 10 to provide a feeling of comfort, though I can't stress enough that comfort does not equal complacency. Iron condors are not riskless trades and must be monitored daily. In many cases, the trade should be unwound prior to expiration to lessen time-in-the-market risk.

Here's how it works for a hypothetical April iron condor.

On Friday February 17, Apple closed at $502.12. At the market price on Friday, you could SELL the April 430 put (with a Delta of 12) for $4.30 and BUY the 420 put (Delta of 9) for $3.20, equaling a credit of $1.10. You then SELL the April 600 call (Delta of 10) for $2.80 and BUY the 610 call (Delta of 8) for $2.20, equaling a credit of $0.60. Your total credit equals $1.70 against $10.00 of risk (i.e., your maximum loss is $8.30 or $10 minus $1.70). Your brokerage will create a maintenance hold on the $10 of risk, but it's required only on one side of the trade as you can't lose at both ends.

That last statement gets to a key attraction of iron condors - you can win at both ends but you can't lose on both. Another attraction, in my mind, is that it's a lot easier to hit singles and doubles than home-runs. The iron condor strategy provides slow and steady returns rather than the potentially monstrous gains (and losses) that can result from the leverage provided by most option strategies.

Please keep in mind that all numbers would be reduced by transaction costs.

Disclosure: I am long AAPL.