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I have used this strategy for years and it works just fine in certain
situations. A condor is an options spread covering 4 strikes. Long the
outside and short the two middle strikes. The total risk is the premium
paid for the spread. When entering the spread tell the broker or the
desk what you want to do and give them the debit amount. Some times
they come back and say the prices are xxxx, your reply is I don't care
what the prices are, all that matters is that the debit is YYYY or less.
The condor extends your profit range by 5 points over a butterfly and
provides numerous trading opportunities. It also allows you to trade the
short contracts and keep your risk minimal. If you use January beans as
an example. S9F. If you feel that this contract will remain between 525
and 600 then you would put on the 525, 550, 575, 600 condor. Based upon
tonight's closes, the 525 = 37.5, the 550 = 20.25, the 575 = 9.5 and 600
= 4.25. the future closed at 559.25. The condor costs
(37.5+4.25)-(20.25+9.5)=12. Maximum value of 25 occurs between 550 and
575. The current intrinsic value of the condor is 9.25 so the premium
paid is 2.5. Like a good game of chess or Shoji there are hundreds of
manipulations you can make from this starting combination to take
advantage of rising and falling markets and end up at days end with the
same position. The one thing to remember is that the spread between the
strikes should be uniform. I hope that this helps. Ira
Steve Carton wrote:
> Has anyone traded an option strategy called a Condor?
>
> Is it a profitable strategy? What are the downside risks?
>
> Thanks in advance.
>
> Steve
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