The condor is a move that uses two separate strangles at a time. This can work in cases where you want to limit your losses but you also want the stock to stay within a certain range.
There are four types of condor moves:
- Long Condor - The long condor uses a long strangle on the inside and a short strangle outside. It involves working long on one call and short on the other while using a high-strike price. After that, you use long and short puts together with a lower strike price. You need the stock to move as high or low in value as possible for this to work. This works best for cases where you notice that the stock is in a certain trend and will surely move up or down. The margin of error is minimal as you will surely lose money if you get in between those two strike prices.
- Short Condor - The short condor is like a short strangle added to a wider long strangle. You sell a call while buying another at a high-strike price. You also sell a put while buying another put with a low-strike price. This is another option trade where the profits are realized between the strike prices. The greatest losses occur when the stock moves too far away and goes up or down a lot. In other words, the short condor is the opposite of the long condor.
- Long Call Condor - The long call condor is the flip side of the basic long condor as you are aiming to have the value of the stock move between the strike points. You can use a bull call spread and a bear call spread on this option.
- Long Put Condor - The long put condor is made with a bull put spread along the lower strike and a bear put spread at the upper strike. This also concentrates on the stock being in between those two strikes for the best profits possible.
