This is one of the basic strategies as it involves entering into one position i.e. buying the Call Option only. Any investor who buys the Call Option will be bullish in nature and would be expecting the market to give decent returns in the near future.
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. ..
Upper Breakeven Point = Strike Price of Short Call + Net Premium Received, Lower Breakeven Point = Strike Price of Short Put - Net Premium Received
LONG CALL Vs IRON CONDORS - Risk & Reward
LONG CALL
IRON CONDORS
Maximum Profit Scenario
Underlying Asset close above from the strike price on expiry.
Net Premium Received - Commissions Paid
Maximum Loss Scenario
Premium Paid
Strike Price of Long Call - Strike Price of Short Call - Net Premium Received + Commissions Paid
Risk
Limited
Limited
Reward
Unlimited
Limited
LONG CALL Vs IRON CONDORS - Strategy Pros & Cons
LONG CALL
IRON CONDORS
Similar Strategies
Protective Put
Long Put Butterfly, Neutral Calendar Spread
Disadvantage
• In this strategy, there is not protection against the underlying stock falling in value. • 100% loss if the strike price, expiration dates or underlying stocks are badly chosen.
• Full of risk. • Unlimited maximum loss.
Advantages
• Less investment, more profit. • Unlimited profit with limited risk. • High leverage than simply owning the stock.
• Chance to gather double premium. • Sure, maximum gains on one-half the trade. • Flexible and double leverage at half price.
