Condor Spread Definition

Definition

The word condor spread identifies a options strategy between four calls using different strike prices and the exact expiration date and also inherent security. Condor spreads can be considered a limited-risk trading system which makes it possible for traders to gain when the inherent security is considered non volatile.

Explanation

A condor disperse is really a limited-risk, limited-profit, non-directional options plan. Implementing a condor requires the purchase price of four criteria, either with a unique strike price, however using the same expiry date and also inherent security. A net outflow of money, or debitcard, is needed to set that the place, which can be generally constructed as follows:

  • Writing a supplementary Contact option
  • Buying an in-the-money Contact option with a strike price that’s lower compared to the in-the-money Contact option offered
  • Writing a supplementary Contact option with a strike price that’s greater compared to in-the-money Contact option offered
  • Buying an out-of-the-money Contact option with a strike price that’s greater compared to out-of-the-money Contact option offered

The aforementioned trades constitute the 4 legs of a lengthy condor disperse. Maximum benefit is achieved while the stock’s price drops between your center two hit prices during expiration. Maximum loss is bound by the very first net debit shot when setting the standing, and can be achieved while the stock’s price drops below the best strike price or above the maximum strike price tag. Breakeven may appear once the stock’s price at expiry is corresponding to the maximum strike price of their lengthy telephone without the net superior, or below the strike price of their best long telephone in addition to the web premium.