A Long Call Condor involves buying one call option at a lower strike, selling two call options at middle strikes, and buying one call option at a higher strike. It profits when the price stays within a defined range near the middle strikes.
- Ideal for low-volatility conditions, where the price is expected to remain stable.
- Strike prices are equidistant (lower, middle, and higher strikes evenly spaced).
- Risk is limited to the net premium paid, while profit is capped at the difference between the adjacent strikes minus the premium paid.
- Provides a safe strategy for range-bound price action.
Example:
- NIFTY trading at 18,000.
- Buy 17,900 Call at ₹200, sell 2 × 18,000 Calls at ₹150 each, and buy 18,100 Call at ₹100 (lot size = 50).
- Outcome:
- If NIFTY stays at 18,000 at expiry:
- Both middle strike calls expire worthless.
- Gain on lower and higher strikes = ₹10,000 (maximum profit).
- If NIFTY rises to 18,100 at expiry:
- Loss from the middle strike calls = ₹5,000.
- Net profit = ₹0.
- If NIFTY moves beyond 17,900 or 18,100 at expiry:
- All options expire worthless.
- Net loss = ₹5,000 (premium paid).
- If NIFTY stays at 18,000 at expiry: