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Double Condor Strategy

Strategy Type:

A Double Condor is a neutral strategy. It's used when an investor anticipates limited price movement in the underlying asset but wants to benefit from increased premium income.

Components: The strategy involves two main components:

  • First Iron Condor: The Double Condor strategy involves two Iron Condor spreads: First Iron Condor: This includes a bearish call spread (short call and long call with a lower strike price) and a bullish put spread (short put and long put with a higher strike price).
  • Second Iron Condor: This includes a bearish put spread (short put and long put with a lower strike price) and a bullish call spread (short call and long call with a higher strike price).

Profit and Loss Potential:

  • Maximum Profit: The maximum profit occurs if the underlying asset's price remains within the range defined by both Iron Condor spreads. The profit is the combined premium received from selling the options.
  • Maximum Loss:The maximum loss is the difference between the strike prices of the long options minus the combined premium received. The loss occurs if the underlying asset's price moves significantly beyond the range.
Break-Even Point: There are typically multiple break-even points, depending on the specifics of the options used. Break-even points can be calculated based on the strike prices of the options.

Strategy Goals:

  • The primary goal of a Double Condor is to profit from limited price movement in the underlying asset, while generating premium income from selling the options.
  • The strategy provides a wider profit range compared to a single Iron Condor.

Risk Management:

  • The risk is limited to the difference between the strike prices of the long options minus the combined premium received.
  • The strategy offers controlled risk with the potential for significant profit within the defined range.