Condor

A condor buys a wide landing zone — it pays off across a whole range of prices, not a single point, in exchange for a larger up-front cost.

What a condor is made of

A condor is a four-strike structure built from a single option type — all calls or all puts. The version most beginners meet first is the long, or debit, call condor, where you pay to open the position. It uses four strikes in ascending order:

• Buy one call at the lowest strike (a long wing).
• Sell one call at the next strike up (an inner, short leg).
• Sell one call at the next strike up again (the other inner, short leg).
• Buy one call at the highest strike (the other long wing).

So you are long the two outer strikes and short the two inner strikes. The two short strikes sit apart from each other, and that gap is the heart of the trade. (The same shape can be built entirely from puts; the payoff at expiration is equivalent.) For a refresher on long versus short legs, see the guide index.

What it is betting on

A long condor is a bet that the stock finishes between the two short, inner strikes at expiration. It is a low-conviction, range-bound directional view: you do not need to call an exact price, only the neighborhood.

The shape of profit and loss

The payoff looks like a flat-topped plateau. Profit is at its maximum across the entire zone between the two short strikes — anywhere in that band pays the same top amount. Outside the outer (long) strikes, the position loses its full cost and no more.

• Max profit = the distance between adjacent strikes minus the net debit paid. It is earned across the whole plateau.
• Max loss = the net debit paid. This is a defined-risk position; you cannot lose more than you put in.
• Breakevens = the lowest strike plus the debit, and the highest strike minus the debit.

A worked example

Suppose a stock trades near 57.50 and you build a call condor with strikes at 50, 55, 60, and 65, each five points apart, for a net debit of 2.00 (200 dollars per one-lot, since each contract covers 100 shares).

• Profit zone (plateau): anywhere from 55 to 60 at expiration.
• Max profit: 5.00 strike width minus 2.00 debit = 3.00 (300 dollars), earned anywhere in the 55–60 band.
• Max loss: the 2.00 debit (200 dollars), if the stock finishes at or below 50, or at or above 65.
• Lower breakeven: 50 + 2.00 = 52.00.
• Upper breakeven: 65 − 2.00 = 63.00.

Between 52 and 63 the trade is profitable to some degree; between 55 and 60 it earns the full 300 dollars.

Condor versus butterfly

A butterfly is the same family of idea with one difference: instead of two separate short strikes, it shares a single middle strike (a 1-2-1 structure). That collapses the plateau into a single sharp peak. A butterfly is cheaper and pays more at its one ideal price, but it has to pin that price; a condor spreads the same bet across a range, so it costs more and tops out lower, but it forgives a wider miss.

The credit cousin

The version most traders actually use is the iron condor, a credit structure built from an out-of-the-money put spread plus an out-of-the-money call spread (both option types). It collects premium instead of paying a debit and is the more popular way to express the same range-bound view.

The honest failure mode

The condor wins only if the stock stays boxed in. A sharp move in either direction past an outer strike, or a volatility surge that drags the stock out of the band, turns the position into a full loss of the debit. Because the maximum gain is modest relative to the cost, a string of small wins can be undone by one trade that breaks out of the range.

Educational only — not investment advice. Options involve a substantial risk of loss and are not suitable for every investor.