Condor Spread

Condor has a WIDER profit zone than butterfly. Butterfly max profit is at a single strike; condor max profit is across a RANGE between the two middle strikes. This makes condor easier to profit from if you expect the price to stay in a range rather than pin at exactly one price.

No. The condor spread has DEFINED RISK. Maximum loss is the net debit paid, which occurs if the underlying is below the lowest strike or above the highest strike at expiration. No margin calls, no surprises.

If price is between the two short strikes at expiration, you achieve MAXIMUM PROFIT. The long lower strike is worth the wing width, the first short is worthless (or has intrinsic offset), and other legs settle to net the max profit.

At expiration, call and put condors with the same strikes have identical payoffs. Choose based on LIQUIDITY - whichever has tighter bid-ask spreads on all 4 strikes. For indices, call condors are often more liquid.

The 4 legs create defined risk. The long wings (outer strikes) limit loss if price moves beyond the range. Without them, you'd have unlimited risk like a short strangle. The structure is: buy protection, sell body, sell body, buy protection.

Lower breakeven = Lower short strike + Net debit. Upper breakeven = Upper short strike - Net debit. For example, with 7,450/7,550 shorts and A$0.23 debit: Lower BE = 7,473, Upper BE = 7,527.

High IV means the short (sold) strikes receive more premium, reducing your net debit. Lower debit = lower risk and higher max profit potential. Also, condors are slightly short vega, so IV decrease after entry adds value.

Close at 50-75% of max profit to lock in gains and avoid gamma risk. Also close by 14-21 DTE as gamma increases significantly in final weeks. Close early if approaching breakevens to limit losses.

Condor: All 4 legs are same type (all calls OR all puts), entered for net DEBIT. Iron condor: Uses both calls AND puts (put spread + call spread), entered for net CREDIT. Same payoff at expiration, different interim behavior.

Wider wings = higher cost but more buffer if price moves. Narrower wings = lower cost but less margin for error. Wing width also determines max profit (wing width - debit). Choose based on expected volatility.

Skew causes different IVs at different strikes. Put skew makes put condors potentially cheaper or more expensive depending on structure. Compare call condor vs put condor pricing for same strikes - choose the better value based on current skew.

Short strikes at approximately 30-35 delta provide good balance between premium collection and probability of staying in the body. This roughly corresponds to 1 standard deviation expected move, giving ~65% probability of max profit.

Institutions typically allocate 1-5% of portfolio to condor risk (measured by maximum loss). They size based on maximum loss, not notional exposure. Position limits also consider aggregate gamma and vega across all condor positions.

Yes. Sophisticated traders use condor profits (range income) to fund tail hedges (OTM puts). Allocate 50% of condor profits to buy crash protection. Creates self-financing hedge program - range income pays for crisis protection.

Calendar condors use different expirations - typically selling near-term body and buying far-term wings. This profits from accelerated near-term decay while maintaining far-term protection. More complex to manage and requires understanding of term structure.