![]() As mentioned above, the far OTM options are bought to protect the short put and call strikes. In this strategy, a trader sells an OTM ( out-of-the-money) put and call options and buys far OTM put and call options. How to deploy a Short Iron Condor strategy? □Īn Iron Condor works just like a short strangle with further out-of-the-money long options purchased which acts as a hedge or a protection to the sold option strikes. To deploy the Iron Condor you need 4 strikes.Ģ) Short and Long: Let’s simplify the long and short of both calls and puts as per the view on the market.Ī) Long Put: You buy it when the view is bearishī) Short Put: You sell it when the view is bullish or range-bound.Ĭ) Long Call: You buy it when the view is bullishĭ) Short call: You sell it when the view is bearish or range-bound. Simply put, consider one leg of Iron Condor strategy as one strike price. In this blog, we will be focusing on the short Iron Condor Strategy.ġ) Multi-leg: means selection of two or more strikes to enter a trade. Long Iron Condor: It is a net debit strategy in which traders expect the underlying to make a significant move in either direction to make a profit. The short Iron Condor is the classic version of this strategy which is often deployed by option tradersĢ. As a net credit strategy, the trader expects the underlying to trade in a range so that at expiry all the options contracts expire worthless and he or she can pocket the entire premium collected. Short Iron Condor: It is a strategy in which a trader receives the net premium after deploying all the four options. The Iron Condor can be deployed in two ways:ġ. The strategy consists of two call options (one short and one long) and two put options (one short and one long), all with the same expiration date and of the same underlying. ![]() But what if your view is neutral and you expect that the index or stock you want to trade will move in a narrow range? Enter, Iron Condor.Īn Iron Condor is a multi-leg, risk-defined and neutral view strategy with limited profit and loss potential. In our previous two blogs, we went through both bullish and bearish strategies, Bull Call, and Bear Put spread as per directional stance. ![]()
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