Reverse Iron Condor as the name suggests is the opposite of Iron Condors. In Reverse Iron Condor, a trader is bullish about volatility and expects the market to make a significant move in the near future in either direction. Here a trader will buy 1 OTM Call Option, sell 1 Deep OTM Call Option, buy 1 OTM Put Option, sell 1 Deep OTM Put Option. This strategy also
This strategy is applied when trader goes long on the underlying asset i.e. he buys the stock in cash market. He has a bullish view and expects the market to rise in the near future, but simultaneously has the fear of downward movement of the markets. In order to cover his position from vulnerabilities he buys one ATM Put Option of the same underlying asset. Here, a trader wi ..
Upper Breakeven Point = Strike Price of Long Call + Net Premium Paid, Lower Breakeven Point = Strike Price of Long Put - Net Premium Paid
Purchase Price of Underlying + Premium Paid
REVERSE IRON CONDOR Vs MARRIED PUT - Risk & Reward
REVERSE IRON CONDOR
MARRIED PUT
Maximum Profit Scenario
Strike Price of Short Call (or Long Put) - Strike Price of Long Call (or Short Put) - Net Premium Paid - Commissions Paid
Profit = Price of Underlying - Purchase Price of Underlying - Premium Paid
Maximum Loss Scenario
Net Premium Paid + Commissions Paid
Max Loss = Premium Paid + Commissions Paid
Risk
Limited
Limited
Reward
Limited
Unlimited
REVERSE IRON CONDOR Vs MARRIED PUT - Strategy Pros & Cons
REVERSE IRON CONDOR
MARRIED PUT
Similar Strategies
Short Condor
Long Call
Disadvantage
• Potential loss is higher than gain. • Limited profit.
Cost of the put options eats into profit margin.
Advantages
• Able to profit whether stocks move in either direction up or down. • This strategy can be used by option traders who cannot use credit spreads. • Predictable maximum loss and profits.