Condor Spread
The Condor Spread (as well as the Iron Condor) is in the same ‘family’ as the butterfly spread trade – however some differences are as follows:
A Condor is a combination of a debit spread and a credit spread – which are all either calls or puts – all at different strikes.
The Iron Condor is the sale of two credit spreads – a bull put spread and a bear call spread – combined together as one option spread trade – with space in between the two separate spreads.
For example, an iron condor on SPX might be constructed as follows:
SELL 1 1180 Call
BUY 1 1190 Call
(this is a 1180/1190 SPX Bear Call Spread)
SELL 1 960 PUT
BUY 1 950 PUT
(this is a 960/950 SPX Bull Put Spread)
In the above SPX Iron Condor example, there is a ‘price range’ or ’space’ between the two separate credit spreads. This range equals 220 SPX points. In most cases, a trader who makes this trade does so with the hope of belief that the SPX will stay within this 220 point range until expiration – without reaching either the 960 put or the 1180 call.
On the other hand, a Butterfly Spread (in this example we are referring to an Iron Butterfly Spread) is also the sale of a bull put spread and the sale of a bear call spread – however the short options of both of these individual spreads are sold at the same strike.
