What is a condor spread in options?

A condor spread is a four-leg neutral options strategy using either all calls or all puts at four different strike prices. It consists of two vertical spreads (bull spread + bear spread) creating a wide profit zone. The strategy profits when the stock stays within a range and benefits from time decay and volatility contraction.

What is the difference between a condor and an iron condor?

Condor: Uses all calls OR all puts (4 strikes). Iron Condor: Uses both calls AND puts (also 4 strikes). Condors are debit spreads (you pay), iron condors are credit spreads (you receive). Condors have slightly wider profit zones and benefit more from directional movement within range. Iron condors are more common and easier to manage.

What is the maximum profit on a condor spread?

Maximum profit = Width of body (middle two strikes) - Net debit paid. Example: Strikes at $95/$100/$105/$110, paid $3.00 debit. Body width = $5 ($105 - $100). Max profit = $5.00 - $3.00 = $2.00 per share ($200 per spread). Occurs when stock is between middle two strikes at expiration.

What is the maximum loss on a condor spread?

Maximum loss = Net debit paid to enter (for long condors). Example: Paid $3.00 = $300 max loss. This occurs if stock is outside the outer wings at expiration. For short condors (credit received), max loss = Wing width - Credit received.

When should you use a condor spread?

Use condor spreads when: 1) Expect range-bound, sideways market, 2) Volatility is high and expected to decrease, 3) Want wider profit zone than iron butterfly, 4) Need defined risk with modest return potential, 5) Stock has established support/resistance levels. Best in high IV environments (IV rank > 50).

Condor Spread Options Strategy - Complete Trading Guide

What is a Condor Spread?

A condor spread (also called a long condor) is a four-leg neutral options strategy that combines two vertical spreads:

Bull spread at lower strikes (buy lower, sell higher)
Bear spread at higher strikes (sell lower, buy higher)
All options are the same type (all calls OR all puts)
Same expiration date for all four legs
Net debit to enter (you pay money)

Long Call Condor Structure

Leg 1: Buy 1 call at Strike A (lowest, ITM)

Leg 2: Sell 1 call at Strike B (middle-low)

Leg 3: Sell 1 call at Strike C (middle-high)

Leg 4: Buy 1 call at Strike D (highest, OTM)

Example: Buy $95, Sell $100, Sell $105, Buy $110

Call Condor vs Put Condor

Long Call Condor

Uses: All call options

Structure: Buy low call + Sell 2 middle calls + Buy high call

Best for: Neutral, slight bearish bias

Example: $95/$100/$105/$110 calls

Long Put Condor

Uses: All put options

Structure: Buy high put + Sell 2 middle puts + Buy low put

Best for: Neutral, slight bullish bias

Example: $110/$105/$100/$95 puts

Note: Call condors and put condors have identical P&L profiles—choose based on which has better pricing/liquidity.

Real Condor Example

SPY Long Call Condor (March 2024)

Setup (March 1)

Stock Price: SPY = $503.50

Outlook: Neutral, expect $495-$510 range through expiration

IV Rank: 55 (elevated, good for condors)

Trade Construction

Buy: March 28 SPY $495 call @ $11.50
Sell: March 28 SPY $500 call @ $8.20
Sell: March 28 SPY $510 call @ $3.80
Buy: March 28 SPY $515 call @ $2.10
Net Debit: ($11.50 - $8.20) + ($2.10 - $3.80) = $1.60 = $160 cost

Profit/Loss Analysis

Wing Width: $5 ($500 - $495 and $515 - $510)

Body Width: $10 ($510 - $500)

Max Profit: Wing Width - Debit = $5.00 - $1.60 = $340

Max Loss: Net Debit = $160

Profit Zone: $501.60 to $513.40 at expiration

Max ROI: $340 / $160 = 212%

Breakeven Points

Lower Breakeven: $500 + $1.60 = $501.60

Upper Breakeven: $510 + ($5.00 - $1.60) = $513.40

Outcome (March 28 Expiration)

SPY Price: $507.20 (between middle strikes ✓)

Days Held: 27 days

All options at expiration:

$495 call: $12.20 value (ITM)
$500 call: -$7.20 value (short, ITM)
$510 call: $0 (OTM, expired worthless)
$515 call: $0 (OTM, expired worthless)

Net Value: $12.20 - $7.20 = $5.00

Initial Cost: -$1.60

Profit: $3.40 per share = $340 profit

Return: 212% in 27 days (MAX PROFIT)

Why This Worked

✅ SPY stayed within profit zone ($501.60-$513.40)
✅ Landed between middle strikes for maximum profit
✅ IV contraction from 55 to 35 helped position
✅ Theta decay worked in favor as time passed

Condor vs Iron Condor

Feature	Long Condor	Iron Condor
Option Types	All calls OR all puts	Calls AND puts
Number of Legs	4	4
Entry	Debit (you pay)	Credit (you receive)
Max Profit	Wing width - Debit	Credit received
Max Loss	Net debit paid	Wing width - Credit
Profit Zone	Slightly wider	Between short strikes
ROI Potential	Higher (100-300%)	Lower (20-50%)
Popularity	Less common	Very common
Best Use	Slight directional bias	Pure neutral

When to Choose Condor vs Iron Condor

Choose Condor if:

You prefer paying debit over receiving credit
Want higher potential ROI
Have slight directional bias
Limited capital for margin requirements

Choose Iron Condor if:

You prefer collecting credit upfront
Want to benefit from theta decay
Pure neutral outlook
More liquid/popular (easier to manage)

Strike Selection Strategy

Balanced Condor (Most Common)

Structure: Equal wing widths, symmetric

Example: $95/$100/$105/$110 (each wing $5 wide)

Body width: $10 between middle strikes

Best for: True neutral outlook

Characteristics: Balanced risk/reward, centered profit zone

Unbalanced Condor

Structure: Unequal wing widths or body placement

Example: $95/$100/$107/$115 (asymmetric)

Best for: Slight directional bias

Bullish bias: Narrow lower wing, wider upper wing

Bearish bias: Wider lower wing, narrow upper wing

Wing Width Guidelines

Narrow wings ($2-3): Lower cost, lower profit, tighter management
Medium wings ($5): Most common, balanced risk/reward
Wide wings ($10+): Higher cost, higher profit, wider profit zone

Rule of thumb: Wing width should be 3-7% of stock price

Risk Management

Position Sizing

Per trade: 2-5% of portfolio maximum
Total condor exposure: No more than 15% of portfolio
Typical allocation: $200-800 per condor
Diversification: Different underlyings, expirations

Exit Strategies

Take Profit at 50-75%

When: Position reaches 50-75% of max profit

Why: Locks in most gains, frees capital

Example: Max profit $300, close at $150-225 value

Cut Loss at 50-100%

When: Stock breaks out of profit zone significantly

Why: Prevents maximum loss

Action: Close all four legs as single spread order

Adjust/Roll

When: Stock approaching breakeven with time remaining

Option 1: Close losing side, let winning side run

Option 2: Roll entire condor to new strikes

Risk: Additional capital at risk

Common Mistakes

❌ Wings Too Narrow

Problem: Small wings = small profit potential, high risk of max loss

Solution: Use minimum $5 wings on most stocks

❌ Entering at Low IV

Problem: Condors benefit from IV contraction; low IV has limited room to fall

Solution: Enter when IV rank > 50

❌ Holding to Expiration

Problem: Gamma risk increases, small moves cause big swings

Solution: Close 7-10 days before expiration

❌ Not Using Limit Orders

Problem: 4-leg orders have wide bid-ask spreads

Solution: Always use limit orders at mid-price or better

Tools & Resources

Condor Builder

Build custom condors
Visualize profit zones
Compare wing widths
Calculate breakevens

Build Condor

IV Scanner

Find high IV stocks
IV rank > 50 filter
IV contraction candidates
Historical data

Scan IV

Greeks Dashboard

Position Greeks
Theta tracking
Vega exposure
Delta monitoring

View Greeks

Related Strategies

FAQ

How do I close a condor spread?

Close all four legs simultaneously as a single spread order. Most brokers allow "close condor" orders. Alternatively, manually close as two separate vertical spreads. Never close legs individually—this creates unwanted naked positions and risk.

Can condors be used in an IRA?

Yes, long condors (debit spreads) are typically allowed in IRA accounts at Level 3 or 4 options approval since they're defined-risk. Check with your broker for specific requirements.

What's the win rate for condor spreads?

Typical win rate: 60-70% when properly managed with early exits. This is higher than long options but lower than credit spreads like iron condors. Win rate depends on profit zone width and market conditions.

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Condor Spread Options Strategy: Complete Guide