← Strategy LabLesson 37 · 4:42
Long condor
Summary
A long condor suits a view that XYZ stays in a band, here $95 to $105, for 30 days. You pay $305 and can make up to $195 anywhere from $95 to $105; you lose the full $305 below $90 or above $110. You break even at $93.05 and $106.95.
Key terms
- long condor
- A four-call trade that buys a low call, sells two calls a little below and above the price, and buys a high call, paying up front for a wide flat top.
- body split into two strikes
- wings
- The bought options on the outside of a condor or butterfly that put a floor under the loss.
- flat top
- The range of prices, here $95 to $105, where a long condor makes the same most-it-can-make result on the last day.
- net debit
- When a pair of trades sends cash out overall.
- T plus zero line
- The blue line on the chart showing your result today, if you closed the trade right now.
- break-even
- The stock price on the last day where you neither make nor lose money: strike plus premium for a call, strike minus premium for a put.
- Condor body
- The two sold strikes in the middle of a condor, here $95 and $105, which make its flat top.
- Condor wings
- The outer bought calls of a long condor, here $90 and $110, past which you lose all you paid.
Check yourself
Answer each question to see why the right answer is right.
1. In the lesson's long condor, how much do you pay to open the trade?
2. XYZ ends exactly at $100 on the last day. What is your result?
3. Where are the two break-even prices?
4. XYZ rallies hard and ends at $110. What happens to your long condor?
5. With nothing else changing, how does the passing of time affect you while XYZ sits at $100?
Finished the video and the quiz? .