Condor Spread
Quick Definition
A neutral options strategy using four different strike prices to profit when the underlying stays within a defined range, similar to a wider butterfly.
What Is Condor Spread?
A condor spread uses four options at four different strike prices with the same expiration, creating a wider profit zone than a butterfly spread. A long call condor involves buying one lower-strike call, selling one lower-middle-strike call, selling one upper-middle-strike call, and buying one upper-strike call. The two middle strikes define the maximum profit zone. Compared to a butterfly, the condor has a wider range of profitability but a lower maximum profit. The iron condor variant (using both calls and puts) is one of the most popular premium-selling strategies. Maximum loss is limited to the net premium paid (long condor) or the width of either spread minus the credit received (iron condor).
Condor Spread Example
- 1With stock at $100: buy $90 call, sell $95 call, sell $105 call, buy $110 call. Max profit between $95-$105, max loss is the net debit paid
- 2A trader expecting SPY to stay between $440-$460 sets up a condor spread with strikes at $435/$440/$460/$465 for a $2 debit and $3 max profit
Related Terms
Iron Condor
A popular neutral options strategy that sells an OTM put spread and OTM call spread simultaneously, profiting when the underlying stays within a defined range.
Butterfly Spread
A neutral options strategy combining a bull spread and bear spread with three strike prices, profiting most when the underlying stays near the middle strike.
Vertical Spread
An options strategy involving buying and selling options of the same type and expiration but at different strike prices.
Strangle
An options strategy involving the purchase (or sale) of an OTM call and OTM put at different strikes with the same expiration, a wider alternative to a straddle.
Iron Butterfly
A neutral options strategy that sells an ATM straddle and buys OTM wings for protection, creating a defined-risk position that profits from low volatility.
Call Option
A contract giving the holder the right, but not the obligation, to buy an underlying asset at a specified price within a specified time period.
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