Short Condor
Components
Short ITM Option
Long ITM Option
Long OTM Option
Short OTM Option
A Short Condor (aka "Iron Condor") is very similar to the short butterfly except the body of the strategy is split between two strike prices.
Example: Short 97 Call, Long 99 Call, Long 101 Call and Short 103 Call.
Risk / Reward
If you're trying to work out the payoff of a short condor manually, it's best to break down the strategy into two separate spreads: a short call spread and a long call spread. In other words:
Short lower strike call spread
Long higher strike call spread
Max loss: Limited. The maximum loss of a short condor occurs at the center of the option spread. If you’ve broken the Condor down as 2 call (put) spreads, take the one that has the maximum distance between the strike prices, add the net premium received for the spread and that is the max loss.
Max gain: Limited. The maximum profit of a short condor occurs on the wings, when the underlying asset is trading past the upper or lower strike prices.
It is the maximum of the difference between the lower strike call spread less the higher call spread plus the total premium received for the condor.
Payoff Spreadsheet
Try using the spreadsheet below to calculate the profit and loss of a short condor.
Just enter the strike prices and option premiums into the top left input box and the graph will update automatically.
Characteristics
Just like a short butterfly, Short Condors are used when an investor believes that the underlying market will break out of a trading range but are not sure in what direction.