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You can write spreads and not have infinite downside risk. Iron condors are designed to collect premium and you’re covered (at a loss, but a fixed loss) if the
by nemo44x 6y ago
You can write spreads and not have infinite downside risk. Iron condors are designed to collect premium and you’re covered (at a loss, but a fixed loss) if the stock goes one way or another too far. Of course at that point we are already more advanced than a YOLO casino roller.
But yes, in general it’s wise to avoid bets with infinite downside and limited upside. You tend to win these bets frequently (and make small gains) but when you do lose it’s catastrophic.
- Pyramus 6y agoI would like to add that even with a spread you can bankrupt yourself if you are assigned to one side of the leg on expiration day after hours, stock moves against you, you aren't notified in time and therefore can't exercise the other leg. It's rare but not that rare.