A 4-leg strategy that involves buying and selling call options with different strike prices to profit from a narrow trading range or a slightly upward price move in the underlying security.
Alias
Long Condor Spreads with Calls
Details
A long call condor is a complex options strategy that involves buying and selling four call options with different strike prices but the same expiration date. The trader buys one call option with a low strike price, sells one call option with a slightly higher strike price, buys one call option with an even higher strike price, and sells one call option with a strike price that is even higher than that.
The trader profits from the strategy if the underlying security remains within a certain price range at expiration. If the price of the security is above the highest strike price, the trader will experience a loss. If the price of the security is below the lowest strike price, the trader will also experience a loss. However, if the price of the security is within the range defined by the strike prices of the options, the trader will earn a profit. This profit potential and risk profile is why the strategy is called a “condor.”
Breakeven
Leg 1 plus the net debit paid
Leg 4 minus the net debit paid
Sweet Spot
The stock price is in between Leg 2 and Leg 3.
Max Profit
Limited and is equal to the difference between the strike prices of the middle two options minus the net debit paid.
Max Loss
Limited to the net debit paid to get into this Condor Strategy
