As we look ahead through 2008, it seems increasingly likely that the U.S. economy is going to fall into recession, and many of our readers have been asking whether our strategy is appropriate for a bear market. One of the most common assumptions people make is that it’s better to trade condors in low volatility, non-trending environments. This is an understandable assumption. Unfortunately, it’s also totally false. The best time to trade condors is in high volatility environments, regardless of the trend. We discussed the first half of that thesis in Part 1, where we explained why high volatility environments are actually a good thing for theta-positive options trades like iron condors.

Here, we’ll tackle the second part of our thesis. Our claim is that iron condors fare no better or worse in strongly trending markets than they do in flat ones...