Iron Condor

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<< MARCH 2010 BUTTERFLY - IRON CONDOR CLOSED  Straddle Spread >>

Similar to an iron condor spread trade, the Condor (without the ‘iron’) is a four legged trade made up of all calls or all puts.

Here is an illustration of a condor spread -

Go long 4 50 Calls
Go short 4 55 Calls
Go short 4 60 Calls
Go long 4 65 Calls

The risk profile of this looks similar to that of the iron condor.

Also - if once one takes a good look at the trade, it also could be argued that this trade is a split strike butterfly trade - or a traditional butterfly trade where the shorts being sold are separated.

Finally - the condor trade - like the one illustrated above - is also a common adjustment technique used by iron condor traders to ‘roll’ the side that is in trouble further away from a threatening move.

For example, in the illustration above, of an iron condor trader had a trade on where the call side was made up of a sold 50 / 55 call credit spread - and it was being threatened - a way that trader could adjust the trade would be to roll the threatened credit spread further up away from the underlying.

To do this in one simple trade would be to place the trade described above - which would wind up moving the 50 / 55 call credit spread up to a 60 / 65 call credit spread.

Technorati Tags: Butterfly Spread, condor spread, Credit Spread, Iron Condor

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