The term condor spread refers to an options strategy involving four calls with different strike prices and the same expiration date and underlying security. Condor spreads are considered a limited-risk trading strategy that allows investors to profit when the underlying security is considered non-volatile.
A condor spread is a limited-risk, limited-profit, non-directional options strategy. Executing a condor involves the purchase of four calls, each with a different strike price, but having the same expiration date and underlying security. A net outflow of cash, or debit, is required to establish the position, which is typically constructed as follows:
The above trades constitute the four legs of a long condor spread. Maximum profit is achieved when the stock's price falls between the middle two strike prices at expiration. Maximum loss is limited to the initial net debit taken when establishing the position, and is achieved when the stock's price falls below the lowest strike price or above the highest strike price. Breakeven can occur when the stock's price at expiration is equal to the highest strike price of the long call minus the net premium, or below the strike price of the lowest long call plus the net premium.