Condor
A condor is a four-legged option strategy that enables a trader to capitalize
on volatility—increased or decreased. Traders can trade long or short iron
condors.
Long Condor
Long one call (put) with strike A; short one call (put) with a higher strike,
B; short one call (put) at strike C, which is higher than B; and long one call
(put) at strike D, which is higher than C. The distance between strike price
A and B is equal to the distance between strike C and strike D. The options
are all on the same security, in the same expiration cycle, and either all calls
or all puts.
Long Condor Example
Buy 1 XYZ November 70 call (A)
Sell 1 XYZ November 75 call (B)
Sell 1 XYZ November 90 call (C)
Buy 1 XYZ November 95 call (D)
Short Condor
Short one call (put) with strike A; long one call (put) with a higher strike, B;
long one call (put) with a strike, C, that is higher than B; and short one call
(put) with a strike, D, that is higher than C. The options must be on the
same security, in the same expiration cycle, and either all calls or all puts.
The differences in strike price between the vertical spread of strike prices A
and B and the strike prices of the vertical spread of strikes C and D are
equal.
Short Condor Example
Sell 1 XYZ November 70 call (A)
Buy 1 XYZ November 75 call (B)
Buy 1 XYZ November 90 call (C)
Sell 1 XYZ November 95 call (D)