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Short Condor Spread

 Profile Version / Simplified Version / Comprehensive Version


Purpose Of Short Condor Spread
1. To Profit When A Stock Moves Up Or Down Quickly
2. To Play "Banker" In A Condor Spread Transaction
3. To Put Time Decay In Your Favor


Expectation Of Short Condor Spread
Volatile


Type Of Spread
Credit Spread


How To Use Short Condor Spread?
Short Condor Spread can be performed using either call options or put options. Sell to open 1 In The Money (ITM) option, buy to open 1 At The Money (ATM) option, buy to open 1 Out of The Money (OTM) option and sell to open 1 further Out of The Money (OTM) option.

(a)Sell One (ITM) + (b)Buy One (ATM) + (c)Buy One (OTM) + (d)Sell One (OTM) 		Short Condor Spread Risk Graph Learn How To Read This Chart

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Profit Potential of Short Condor Spread :
Short Condor Spreads achieve their maximum profit potential at expiration if the price of the underlying asset is within the 2 middle strike prices.


Profit Calculation of Short Condor Spread:
Maximum Profit = Net Credit
Maximum Loss = Difference between consecutive strike prices - credit


Risk / Reward of Short Condor Spread:

Upside Maximum Profit: Limited

Maximum Loss: Limited

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Break Even Points of Short Condor Spread:
A Short Condor Spread is profitable if the underlying asset expires outside of the price range bounded by the upper and lower breakeven points.

1. Lower Breakeven Point : Credit + Lower Strike Price

2. Upper Breakeven Point : Higher Strike Price - Credit


Advantages Of Short Condor Spread:

  • Largest maximum profit potential amongst the complex volatile option strategies.

  • Maximum loss and profits are predictable and customisable.

  • Narrower breakeven range than the basic volatile option strategies.

  • Net credit received lowers risk and puts time decay in your favor.

  • Lower maximum loss than basic volatile option strategies.


    Disadvantages Of Short Condor Spread:

  • Larger commissions involved than basic volatile option strategies with lesser trades.

  • Has a wider breakeven range than the Short Butterfly Spread.


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