![]() ![]() Meanwhile, you are collecting $2 dollars ($200 per spread) in premium for selling the entire iron condor. In this example, the maximum width of each spread is $10 (110/120 call spread 80/90 put spread total of $1,000 per spread). The maximum theoretical loss for selling an iron condor is the difference between the strikes minus the credit you receive for selling the entire iron condor (not including exercise/assignment risk, which we discuss later). You only make this profit if all the options expire worthless, which means Condor Inc.’s share price has to stay between $90 and $110 at expiration. In this example you are collecting $1 for selling the call spread and $1 for selling the put spread, for an overall net credit of $2 (remember, options control 100 shares and have a standard multiplier of 100, so your total net credit would be $200). Risk/Reward: The most you can expect to profit from selling an iron condor is the premium you collect for the entire package. All of the options (both the calls and puts) expire on the same day, two months from the date you bought them. The net credit for the put credit spread is $2 - $1 = $1. Notice that both of the put options strike prices are below the current share price. You also buy a put option with a strike price of $80, paying $1. ![]() Let’s say you sell a put option with a strike price of $90 and receiving a premium of $2. Next, you build the other half of the iron condor, the put credit spread. The net credit for the call credit spread is $2 - $1 = $1. Then you buy a call option with a strike price of $120, paying $1. For example, you could sell a call option with a strike price of $110, receiving a premium of $2. You decide to construct an iron condor in the hopes of profiting from your opinion.īuilding your iron condor: First, you build a call credit spread above the current stock price. is trading at $100 a share, and you believe the stock price won’t change much in the next couple of months. Imagine that a hypothetical company called Condor Inc.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |