A Collar strategy involves holding a long position in the underlying asset while simultaneously buying…
Iron Condor
An Iron Condor combines a Bull Put Spread and a Bear Call Spread to profit from minimal price movement within a range. It involves selling an OTM put and an OTM call and buying farther OTM put and call options for protection.
- Ideal for neutral markets, where price is expected to stay within a defined range.
- Risk and reward are capped, making it a safer strategy for range-bound conditions.
- Profits from time decay and low volatility.
Example:
- NIFTY trading at 18,000.
- Sell 17,800 Put at ₹100 and 18,200 Call at ₹100.
- Buy 17,600 Put at ₹50 and 18,400 Call at ₹50 (lot size = 50).
- Outcome:
- If NIFTY stays between 17,800 and 18,200 at expiry:
- Both sold options expire worthless.
- Net profit = ₹5,000 (premium collected).
- If NIFTY rises to 18,300 at expiry:
- Loss on call = ₹5,000.
- Put expires worthless.
- Net profit = ₹0.
- If NIFTY falls to 17,700 at expiry:
- Loss on put = ₹5,000.
- Call expires worthless.
- Net profit = ₹0.
- If NIFTY stays between 17,800 and 18,200 at expiry: