Long Iron Condor
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Direction
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Neutral
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Strategy Type
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Volatility
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Legs
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Sell OTM Put
Buy OTM Put (Lower Strike)
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Sell OTM Call
Buy OTM Call (Higher Strike)
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Max Reward
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Limited to the protection placed using the bought legs
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Max Risk
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Premium Received - Spread
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Time Horizon
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Short to Medium
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Risk Profile
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Medium to High
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Payoff Diagram
Description
The aim of the Long Iron Condor is to have the stock price, at the time of expiry, to finish in between the the level of the sold put and the sold call. Time value is working in the traders favour as essentially the trader holds two credit spreads. This is also decreases the risk, as the trader receives more in premium.
Steps Involved
Look to widen the gap as much as possible between the two credit spreads to maximise the possibility of the stock finishing at the desired level at expiry. But also watch to see that the premium you are receiving is enough. The steps from there are details above in 'legs'.
Rational
Expecting a decrease in volatility, with the stock remaining stable until the end of expiry.
Iron Condor Tutorials
This webinar by Stuart McClure from Minc Trading, analyses three different strategies.
The Credit Put Spread - A bullish speculative strategy used to cap the risks of selling naked puts whilst receiving a premium for the risk associated.
The Credit Call Spread - A bearish speculative options strategy that profits when stocks remain at or below a specified level.
The Iron Condor - An options strategy created when the Credit Call and Credit Put spread strategies are combined.