This is a good strategy for when you have a neutral feeling about a stock because it is trading on narrow range over a period of time. This is similar with the butterfly in a sense that it has limited risk and reward.

A long condor is like the long butterfly. It has two options at middle strike but you will split it into two middle strikes. In a butterfly, you only have one. Thus, the condor is a butterfly with four strikes:

Long 140 call, short 150 call (bull call spread)

Short 160 call, long 170 call (bear call spread)


If stock ABC is trading at $150 and you believe that this will continue for a period of time, you can then sell one 150 call and one 170 call. You will then have to buy 140 call and one 170 call as leverage.  You have now created the long condor. This is called long because of the cash outlay for creating the position.

Long Condor
Sell 1 75 Call @ $6.00 ($1,200.00) (condor body)
Sell 1 80 Call @ $4.00 ($1,44000) (condor body)
Buy 1 70 Call @ $9.00 $1,800.00 (wing)
Buy 1 85 Call @ $2.00 $400.00 (wing)
Cost of Trade $200.00


You can do the above using puts instead of call. The above example does not include the commission, tax and interest.

As you can see, you will reach the maximum profit when the stock is between the 150 and 16o0. At $150, the 150, 160 and 170 options would be without value and the 140 call will be $100. Between the 150 and 160, the loss on the short 1560 call will be offset by the 140 calls. Any price that is above the $170 and below $14 means you will have the maximum loss of $200.

The condor is similar with the long and short butterflies so you might also want to check out these strategies.

Bullish Strategies Neutral Strategies Bearish Strategies