Market Movements

^{*Weekly Return is calculated as market open of the previous Wednesday, to market close this Tuesday (yesterday); Current Level is Tuesday’s (yesterday’s) close.}

Weekly Rollout

On May 6, 2025, the stock market tapped the brakes, with major indexes slipping slightly—unsure whether to nap or panic. Investors grappled with mixed economic signals and inflation worries, making the trading floor feel more like a waiting room than a battlefield. Modest losses wrapped the day, just enough to remind everyone that certainty remains elusive.

Zero-day-to-expiry (0DTE) options—those high-octane contracts expiring the same day—may soon extend to individual stocks like Tesla and Nvidia. Nasdaq is seeking SEC approval to expand these risky instruments beyond indexes and ETFs. Some traders see strategic value, others liken them to financial fireworks. If approved, expect a new wave of volatility in tech favorites.

Skechers is stepping into a new chapter with a $9.4 billion buyout by 3G Capital. Going private may let the footwear giant move more nimbly in the competitive sneaker space. Investors are watching to see if this helps Skechers outpace rivals in the race for market share.

Warren Buffett warned against using tariffs as trade weapons, calling them “an act of war” and noting they amount to a tax on consumers—“The Tooth Fairy doesn’t pay ’em,” he said. He also announced plans to step down as Berkshire Hathaway CEO by year’s end, with Greg Abel set to take the reins.

“Good-To-Know’s”

As expiration approaches, gamma risk increases because the position becomes more sensitive to small price changes. A move toward the short strikes can result in significant swings in the position's value, making it critical for traders to manage or adjust the position to avoid large losses.

Quote(s) I Like

Thought Throttle

What is the Iron Condor?

The Iron Condor is a defined-risk, non-directional options strategy that profits when a stock stays within a specific range through expiration. This strategy consists of 4 legs—Sell 1 Out-of-the-Money (OTM) Call, Buy 1 further OTM Call, Sell 1 OTM Put, Buy 1 further OTM Put.

This setup creates two vertical spreads—one on the call side and one on the put side. When combined, they form a zone of profitability between the strike prices of the short call and the short put. Here is a visual:

You collect a net credit when opening the position, and that credit is your maximum potential profit. You earn the full premium if the stock price stays between your short strikes through expiration. The maximum loss is limited to the difference between the strikes of either spread, minus the premium received.

Think of this trade as selling two credit spreads on either side. Here are the graphs of a bull put spread and a bear call spread. You can see how they could combine to make the Iron Condor (the blue lines):

Iron Condors also typically require less collateral than selling naked options, since the long legs cap your potential losses. This makes the strategy a popular choice for traders with smaller accounts or those focused on defined-risk trades.

Iron Condors Summarized

The Iron Condor offers a strategic way to take advantage of time decay and overpriced options—without needing to predict a stock’s exact direction. You’re not betting on where it will go, but rather where it won’t. That simple shift in mindset can give traders a powerful edge, especially in neutral or low-volatility environments.

Over time, the consistency (ideally) of Iron Condors can lead to meaningful, compounding returns—especially when paired with sound risk management and disciplined position sizing. The goal isn’t to hit home runs—it’s to keep getting on base and let time work in your favor.

Whether you're growing a small account or just adding more structure to your trades, the Iron Condor can be a smart addition to a high-probability, income-focused strategy toolkit.

Trade Mechanics

Taking advantage of earnings and the heightened IV that comes with the pre-earnings time period, we can look to Walmart to determine how we would like to set up the trade.

Currently (May 6, 2025 ~2:30 PM), Walmart (WMT) sits at $98.90. Using the ATM Straddle pricing, we can see that the market is pricing in a ~5.80% (~$5.75) movement through May 16th.

Walmart has earnings on Thursday, May 15th, 2025, and currently has an 30-Day IV of 33.0, which is the 94th percentile. In other words—Walmart has high IV.

Even with this elevated IV, if we were determined that WMT would stay between our implied range of $93.15 and $104.65, we could set up an iron condor to profit off of this trade.

It would look something like this:

• Sell the 16 May 2025 $94 Put Option for $1.22

• Buy the 16 May 2025 $91 Put Option for $0.72

• Sell the 16 May 2025 $104 Call Option for $0.88

• Buy the 16 May 2025 $107 Call Option for $0.43

This would net us a credit of $95, with $205 of capital at risk. That is a ~46.3% return on risk. Very Solid.

The breakeven points are $93.05 on the downside and $104.95 on the upside—right around where the market is expecting the stock to land post-earnings. As long as WMT stays within that range, we keep the full premium. Of course, if the stock makes a big move outside those levels, especially after earnings, we could lose the entire $205 risked. So while the reward is solid, the risk is real.

Important Note: Obviously, with a return this high in just over a week, there is a very real possibility that the stock will move out of our range, and the entire amount risked will be lost. Know this information if setting up a trade before you even think about implementing the trade.

This is for educational purposes only—not a trade recommendation. Remember to always do your own due diligence and consult a financial advisor before making investment decisions.

Throttle Q&A

General Tips for Iron Condors

Use Delta When Picking Strikes

Delta helps gauge the probability of a strike finishing in the money. Find an efficient delta for your short strikes that fits your outlook and tolerance. I like deltas between 0.2 and 0.25.

• Lower delta offers safer positions with smaller premiums.

• Higher delta gives more credit but increases risk.

Choose based on your risk tolerance and market outlook.

Wing Size Balance

Find your balance for wing size on the Iron Condor. I like to try and collect 25–30% of the spread width as a credit.

For example, if each wing is $5 wide, target a net credit of $1.25–$1.50. Higher credits improve your breakevens and max return, but also bring more exposure if the trade moves against you. Base your target on volatility and confidence in your range.

High IV with Low *Actual* Volatility

Iron condors work best when implied volatility is high (elevated premiums), but the actual price movement is low. This means the options are richly priced, but the underlying isn’t likely to breach your strikes. Look for setups where IV is elevated relative to historical volatility for a strong edge, though there is evidence that the movement will not be drastic.

Profit Capture - Early Exit

Holding to expiration can expose you to last-minute swings, volatility spikes, gamma risk, etc.

Instead, most traders exit when they’ve captured a certain percentage of the max profit, especially if it happens early in the trade. It locks in gains and reduces unnecessary risk.

Find the number that works for you. Common knowledge holds that it is somewhere around 50% - 75%.

Strategies with Multiple Legs

Iron condors are multi-leg options strategies involving four separate contracts, which increases complexity and execution risk.

Slippage, wide bid-ask spreads, or partial fills can negatively affect your entry or exit. Mismanagement or poor execution may lead to unexpected losses, especially in volatile or fast-moving markets.

Always ensure you understand the mechanics, margin requirements, and risks before trading.

Taxes?

Iron condors are usually taxed as short-term capital gains, meaning profits are taxed at your ordinary income rate. Since each leg is a separate transaction, your broker will report them individually, and it’s up to you (or your software/accountant) to match them as a single strategy.

Other notes:

• Wash sale rules can apply if you close and reopen similar positions within 30 days, potentially delaying loss recognition.

• Trading in IRAs or tax-advantaged accounts may carry different tax implications.

• Active traders may consider the mark-to-market (MTM) election under IRS Section 475(f), but it requires proper setup and isn't for everyone.

Consult a tax professional to understand how these rules apply to your situation.

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