Iron Condor is a neutral trading strategy. A trader tries to make profit from low volatility in the price of the underlying asset. This strategy will be better understood if you recall ‘Bull Put Spread’ & ‘Bear Call Spread’. A trader will buy one Deep OTM Put Option and sell one OTM Put Option,. He will also sell one OTM Call Option and buy one Deep OTM Call Option.
Bear Call Spread option trading strategy is used by a trader who is bearish in nature and expects the underlying asset to dip in the near future. This strategy includes buying of an ‘Out of the Money’ Call Option and selling one ‘In the Money’ Call Option of the same underlying asset and the same expiration date. When you write a call, you receive premium thereby r ..
Upper Breakeven Point = Strike Price of Short Call + Net Premium Received, Lower Breakeven Point = Strike Price of Short Put - Net Premium Received
Strike Price of Short Call + Net Premium Received
IRON CONDORS Vs BEAR CALL SPREAD - When & How to use ?
IRON CONDORS
BEAR CALL SPREAD
Market View
Neutral
Bearish
When to use?
When a trader tries to make profit from low volatility in the price of the underlying asset.
This strategy is used when you are bearish in market view. The strategy minimizes your risk in the event of prime movements going against your expectations.
Upper Breakeven Point = Strike Price of Short Call + Net Premium Received, Lower Breakeven Point = Strike Price of Short Put - Net Premium Received
Strike Price of Short Call + Net Premium Received
IRON CONDORS Vs BEAR CALL SPREAD - Risk & Reward
IRON CONDORS
BEAR CALL SPREAD
Maximum Profit Scenario
Net Premium Received - Commissions Paid
Max Profit = Net Premium Received - Commissions Paid
Maximum Loss Scenario
Strike Price of Long Call - Strike Price of Short Call - Net Premium Received + Commissions Paid
Maximum Loss = Long Call Strike Price - Short Call Strike Price - Net Premium Received
Risk
Limited
Limited
Reward
Limited
Limited
IRON CONDORS Vs BEAR CALL SPREAD - Strategy Pros & Cons
IRON CONDORS
BEAR CALL SPREAD
Similar Strategies
Long Put Butterfly, Neutral Calendar Spread
Bear Put Spread, Bull Call Spread
Disadvantage
• Full of risk. • Unlimited maximum loss.
• Limited amount of profit. • Margin requirement, more commission charges.
Advantages
• Chance to gather double premium. • Sure, maximum gains on one-half the trade. • Flexible and double leverage at half price.
• This strategy takes advantage of time decay. • Investors can get profit in a flat market scenario. • Investors can earn options premium income with a lower degree of risk.