What Is the Condor Options Strategy and How Does It Work?

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Contributor, Benzinga
June 6, 2023

Options trading gives traders more opportunities to profit from stock price movements. While people trading stocks can only benefit from upward and downward movement, options traders can use multiple hedges. Traders can use hedges that benefit them if the stock market goes up, down or sideways. The condor is one options strategy that helps traders who expect very little movement in the underlying stock. Understanding how the condor option strategy works may help with portfolio returns.

What Is a Condor Spread?

A condor spread is a strategy that helps traders when the market experiences low volatility. Conversely, you can enter a short condor position that benefits from a sharp price movement in either direction. A condor spread consists of two long calls and two short puts or two long puts and two short puts with the same expiration dates. Every condor spread has four options contracts that are all the same expiry.

How Does the Strategy Work?

The condor options trading strategy limits your gains and losses. How you set the strike prices for each option determines your maximum profit and loss. Some traders receive a premium for initiating a condor strategy, while others pay a premium. 

Types of Condor Spreads

Options traders can choose from four types of condor spreads. These spreads can net you premiums or cost some money in exchange for a higher potential payoff.

Long Condor With Calls

A long call condor with calls requires a net debit. You will have to pay a small sum to acquire this position, but you can adjust the strike prices to determine the premium and maximum gain. 

You will need to buy two calls and sell two calls to initiate this position, all with different strike prices. The long calls have the highest and lowest strike prices, while the sold calls have strike prices in between. If a stock trades at $87 per share, a trader can initiate a long condor with calls with the following positions:

  • Buy 1 call with an $80 strike price
  • Sell 1 call with an $85 strike price
  • Sell 1 call with a $90 strike price
  • Buy 1 call with a $95 strike price

The long calls with the $80 and $95 strike prices have higher combined premiums than the combined value of the shorted calls with the $85 and $90 strike prices. It is optimal to set up a long condor with calls when the stock price is between the strike prices of the shorted calls.

Long Condor With Puts

A long condor with puts also results in a debit that depends on the strike prices. A trader should position the strike prices so that the share price is in between the strike prices of the shorted puts. If a stock currently trades at $100 per share, a trader may consider the following approach for a long condor with puts:

  • Buy 1 put with a $90 strike price
  • Sell 1 put with a $95 strike price
  • Sell 1 put with a $105 strike price
  • Buy 1 put with a $110 strike price

Just like with any condor, the expiration dates are the same. The maximum loss for a long condor is any share price above the highest strike price or below the lowest strike price. The maximum gain falls between the strike prices of the shorted options. 

The long put condor has two breakeven points:

  • Breakeven No. 1 = Long put with higher strike price - Premium
  • Breakeven No. 2 = Long put with lower strike price + Premium

Short Condor With Calls

A short condor with calls results in a net credit. You receive some cash for starting this position and realize a maximum profit if the stock’s price falls below the lowest strike price or above the highest strike price. The trader will have the maximum loss if the stock’s price falls between the strike prices of the long calls. If a stock is valued at $50 per share, you can use the following options to initiate a short condor with calls:

  • Sell 1 call with a $40 strike price
  • Buy 1 call with a $45 strike price
  • Buy 1 call with a $55 strike price
  • Sell 1 call with a $60 strike price

Short condor options traders need sharp price movements to realize the maximum gain, a distinction from long condor traders who prefer a sideways market. Traders can adjust the strike prices to minimize risk and gains. The maximum loss is the difference between the long call strike prices minus the net credit received. 

If an options trader receives a net credit of $4 from this trade, the maximum loss is $6. That’s because the gap between the $45 and $55 strike prices (the two long calls) is $10. Subtracting the net premium results in a maximum loss of $6. The same rules for maximum gains and losses also apply to a short condor option strategy with puts.

Short Condor With Puts

A short condor with puts results in a net credit. You receive some funds for initiating the position that you can use to buy options or stocks. Some people pocket the premium as if it were a dividend, but the maximum gain and loss for short condors with puts is the same as a short condor with calls.

If a stock trades at $200 per share, a trader may consider opening up a short condor with puts by using the following strike prices:

  • Sell 1 put with a $190 strike price
  • Buy 1 put with a $195 strike price
  • Buy 1 put with a $205 strike price
  • Sell 1 put with a $210 strike price

Potential Advantages of Condor Spreads

Condor spreads have several advantages over other trading strategies.

  • Limit your losses: Condor spreads have built-in limits that minimize your losses if the trade does not go your way. If you buy a single option, you do not give yourself any hedge if the underlying stock does not move in a favorable direction. 
  • Receive a premium right away: Some condor strategies let you receive a premium right away and wait for the trade to play out. You can use that premium in your brokerage account to enter another options trading strategy or buy individual shares of your favorite stock.
  • Profit in a low-volatility market: Traditional stock traders thrive when the market is volatile. They need sharp price movements to enter and exit stocks for profit. The condor strategy can provide returns even if the market goes sideways, something you can’t get as much of with traditional stock trading.
  • Adjustable based on risk tolerance: Every options trader gets to decide their level of risk. You can create a larger spread to assume more risk and higher potential gains. You can also set strike prices that are all close to each other to minimize your potential losses. Less risk means a lower potential reward, but it is your choice.
  • The stock direction carries less weight: For some options trading strategies, you must correctly predict which way the stock moves. A short condor only needs sharp price movement in either direction, while a long condor trader prefers a sideways price. You have more ways to achieve a profit than relying on one specific outcome.

Limitations of the Condor Spreads

Condor spreads have their advantages, but it is important to consider the pros and cons of any investment before giving it a closer look.

  • Limited profits: With options trading, you can’t limit your downside without also limiting your upside. Condors won’t make as much money as long calls and puts that go right, but the lower risk can justify limited profits for some traders.
  • Higher trading fees: Each condor requires four options. You need four calls (two long and two short) or four puts (two long and two short) to initiate a condor. Some options brokers charge a flat fee regardless of how many options you buy. This arrangement can help traders who want to enter several condor positions at the same time. Other brokers charge per contract. If the fee is 65 cents per option contract, it will cost $2.60 just to enter the position. Then, if you exit the position before it expires, you will have to pay another $2.60 in fees. These fees can add up if you initiate multiple condor positions, especially if you also get out of them before the options expire.
  • Any leg of the condor can get exercised: If one of the four options contracts becomes in the money, it is eligible to get exercised. Most traders wait until expiration to exercise options, but some prefer to wait before the expiration date to get started, especially if a dividend is involved. If a leg of the condor gets exercised, you can be forced to buy or sell 100 shares of the underlying stock. Exiting a condor position before expiration can mitigate this risk.
  • You may visit your portfolio more often: Trading options and initiating a condor may increase the number of times you log into your portfolio. You may find yourself refreshing stock prices more often and frequently deliberating what to do next.
  • It can take longer to complete a trade: Options prices can change quickly and impact whether your trade goes through or not. You can attempt to buy a call or put at the midpoint only for the midpoint to change as you submit the order. This phenomenon can happen with any of the four options you need for the condor. It may take an extra minute or two to complete some condor trades.

Flying High with the Condor Strategy

The condor is a useful options trading strategy that can generate some upside while minimizing your potential losses. You can set up a condor to receive a premium or make a small payment for a higher potential reward. Options traders can use calls or puts when initiating a condor and can adjust the strategy to align with their portfolio goals.

Frequently Asked Questions


How do you use a condor?


You can use a condor to profit from sharp price movements or a sideways market, depending on the type of condor you set up.


Is condor a good strategy?


The condor strategy can help investors minimize their risk and potentially realize profits. It can be a useful strategy.


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

Marc Guberti

About Marc Guberti

Marc Guberti is an investing writer passionate about helping people learn more about money management, investing and finance. He has more than 10 years of writing experience focused on finance and digital marketing. His work has been published in U.S. News & World Report, USA Today, InvestorPlace and other publications.