condors are identical to long butterflies, with the exception that the two
middle bought options have different strikes. The Long Call Condor is another rangebound
strategy and is the opposite of a Short Call Condor, which is a volatility
condors are quite popular because they offer a good risk/reward ratio, together
with low cost. The long options at the outside strikes ensure that the risk is
capped on both sides, and this is a much more conservative strategy than the
Long Call Condor involves a low strike long call, a lower middle ITM short
call, a higher middle out-of-the-money short call, and a higher out-of-the-money
long call. The resulting position is profitable in the event of the stock
remaining rangebound. Here the risk/reward ratio is attractive, and the
profitable area of the risk profile is wider than that of the Long Butterfly.
You expect very little movement in the price of the stock.
you expect the price of the stock to move very little, and you want capital
gains at a low cost.
is trading at $52.87 on May 12, 2011.
June 2011 45 strike call for $8.52.
June 2011 50 strike call for $4.82.
June 2011 55 strike call at $2.34.
June 2011 60 strike call for $0.98.
benefit is that, for little capital outlay, you can profit from a rangebound
stock with capped low risk.
risk is the net debit of the bought and sold options. The reward is the
difference between adjacent strikes minus the net debit.
difference between adjacent strikes minus net debit.
net debit paid.
even up: higher strike minus net debit.
even down: lower strike plus net debit.
effect, low volatility
Of Time Decay
when the trade is profitable, and negative when it is not profitable. The stock
will be profitable when you enter the trade, so from then on time decay is
stem a loss, unravel the position.
the position by buying back the options sold and selling the options bought.