An iron condor is tested when the stock approaches one short strike. The worst case is unchanged, the wider wing's width minus the total credit, but its probability has risen. The responses are closing the whole condor, closing or rolling only the tested side, rolling the untested side closer for more credit, or holding to a pre-set stop; each changes the risk in a specific way, and the decision rule is best set before entry.
Less than the mark makes it look. The maximum loss was fixed at entry, the wider wing's width minus the total credit, and it has not moved. What moved is its probability: the tested short strike's delta has grown, the condor now carries a directional lean it did not start with, and the untested side has lost most of its value, which is why the untested side often looks like free money to close.
One set before entry, and checked mechanically. Common published triggers are the tested short strike's delta reaching about 0.30 to 0.35, the cost to close reaching a multiple of the credit (2x is common), or the time exit arriving with the position still tested. The when to close a credit spread page covers the same rules for a single spread, and managing a tested credit spread goes through the mechanics of each path in more detail.
The condor and every adjustment as one position with one result. Counting a rolled side as a new trade turns one losing decision into a string of small wins and one hidden loss, and the journal stops measuring the plan.
Less than the mark makes it look. The maximum loss was fixed at entry, the wider wing's width minus the total credit, and it has not moved. What moved is its probability: the tested short strike's delta has grown, the condor now carries a directional lean it did not start with, and the untested side has lost most of its value, which is why the untested side often looks like free money to close.
Close the whole condor. Locks in the current loss and ends the risk. The cleanest response when the stop rule says so. Close only the tested side. Removes the side carrying the risk and keeps the untested side's remaining credit working. The untested side then stands alone as a credit spread with its own exit rules. Roll the tested side. Buy back the tested spread and sell one further out of the money, the same expiration or later.
One set before entry, and checked mechanically. Common published triggers are the tested short strike's delta reaching about 0.30 to 0.35, the cost to close reaching a multiple of the credit (2x is common), or the time exit arriving with the position still tested. The when to close a credit spread page covers the same rules for a single spread, and managing a tested credit spread goes through the mechanics of each path in more detail.
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