Short Condor
Components
Short ITM Option
Long ITM Option
Long OTM Option
Short OTM Option
A Short Condor is very similar to the short butterfly except the body of the strategy is split between two strike prices.
Example: Short 97 Call, Long 99 Call, Long 101 Call and Short 103 Call.
Risk / Reward
If you're trying to work out the payoff of a short condor manually, it's best to break down the strategy into two separate spreads: a short call spread and a long call spread. In other words:
Short lower strike call spread
Long higher strike call spread
Max loss: Limited. The maximum loss of a short condor occurs at the center of the option spread. If you’ve broken the Condor down as 2 call (put) spreads, take the one that has the maximum distance between the strike prices, add the net premium received for the spread and that is the max loss.
Max gain: Limited. The maximum profit of a short condor occurs on the wings, when the underlying asset is trading past the upper or lower strike prices.
It is the maximum of the difference between the lower strike call spread less the higher call spread plus the total premium received for the condor.
Payoff Spreadsheet
Try using the spreadsheet below to calculate the profit and loss of a short condor.
Just enter the strike prices and option premiums into the top left input box and the graph will update automatically.
Characteristics
Just like a short butterfly, Short Condors are used when an investor believes that the underlying market will break out of a trading range but are not sure in what direction.
MarlonApril 13th, 2012 at 11:01pm
Adarsh, it all depends on the price of the option,
lets say, the spread between the calls is $2, total out of pocket, including the commissions and the premium received, should be less then 2, therefore the remaining is your potential profit....so unless you specify the price of the options bought and sold, there will be no way to tell you how much your potential profit will be.
PeterOctober 3rd, 2011 at 11:05pm
Depends on the prices you paid/received for the options. If you have those you can use the spreadsheet above the comments here, which will tell you your P&L at expiration.
yuvrajOctober 1st, 2011 at 10:45am
Example: Short 97 Call, Long 99 Call, Long 101 Call and Short 103 Call. in that example what will my profit
PeterSeptember 12th, 2010 at 9:56pm
Because a short call will put money in your account straight away (credit) whereas a long put requires you to outlaw money (debit). Money you receive straight away you are able to earn interest on.
adarshSeptember 10th, 2010 at 11:34pm
dear sir,in both (buying a put and writing a call) we are bearish about the market.in first condition profit are unlimited and loss are limited while in other profit are limited and loss are unlimited.then why we use writing a call for limited profit.
PeterSeptember 5th, 2010 at 5:14am
For any long position you want to pay as little as possible i.e. zero.
adarshSeptember 5th, 2010 at 1:18am
at which price of option i should enter in long condor to get a maximum profit. for example--if i want long 97call,short99call,short101call,and long 103call.
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