Condor Spreads

The condor spread is similar to the butterfly spread strategy except that it involves four different strike prices. This strategy can be constructed using calls or puts. It is also a neutral option-trading strategy. Therefore his holder is also short volatility.


Using calls, a condor spread constitutes a long position in a call struck at a lower price K1, a short position in a call with a first intermediate strike K2, a short position in a call with a second intermediate strike K3, and long a call struck at a higher price K4.


The maximum payoff is equal to 2ε and occurs when K2 ≤ ST ≤ K3. The condor spread strategy is difficult to achieve since the holder has to trade in four different options simultaneously.


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