Short Put Condor

A bullish options strategy that involves selling and buying four put options with different strike prices to profit from a narrow trading range or a slightly upward price move in the underlying security.

Description

A short put condor is a bullish options trading strategy that involves selling a put option with a low strike price, buying a put option with a higher strike price, selling a put option with an even higher strike price, and buying a put option with an even higher strike price. All of the options have the same expiration date and are typically used in a neutral market outlook. The strategy is designed to profit from a narrow trading range or a slightly upward price move in the underlying security. It is called a “condor” because the profit potential and risk profile of the position resemble the shape of a condor’s wings.
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. The maximum profit is limited and is equal to the difference between the prices at which the options were sold and bought. The maximum loss is unlimited and is equal to the difference between the strike prices of the outer two options plus the net credit received to enter the position.

Breakeven

Leg 2 minus net credit received to enter the option
Leg 3 plus the net credit received to enter the option

Sweet Spot

The stock price is less than Leg 1 or more than Leg 4

Max Profit

Limited to the net credit received

Max Loss

Difference between the strike prices of the outer two options minus the net credit received to enter the position.