Investment Type: Credit
Strike Prices: ITM for 1st sold leg, ATM (near the money) for both bought legs, OTM for 2nd sold leg.
Expiration Month: Same expiration months for all legs and should be current month
Composition: Sell lower strike Call + Buy middle strike Call + Buy middle higher strike Call + Sell higher strike Call

 
  Short Call Condor Profile Chart  
 

 
Description:

 

Short Call Condor is less popular than Long Call Condor. We need the stock price to move significantly to one of the direction and the rewards will be capped severely as well. A Long Strangle strategy will do a better job than Short Call Condor with slightly more expensive cost and uncapped potential rewards.

Major disadvantage with executing Condor strategies is that the strategy will eat up a lot of commissions and slippage costs (the difference between bid and ask spread)

 
  Example  
 

 

Entry:


Maximum Initial Investment = $5,000 (or based on 5% money management rule)

Stock Price :
$34.00
   
Buy/Sell :
Sell
    
Strike Price :
30 Call
 } Premium: $4.30
Expiration Date :
December
No of Contracts :
30
    

 

Stock Price :
$34.00
   
Buy/Sell :
Buy
    
Strike Price :
32.5 Call
} Premium: $2.15
Expiration Date :
December
No of Contracts :
30
    

 

Stock Price :
$34.00
   
Buy/Sell :
Buy
    
Strike Price :
35 Call
 } Premium: $0.80
Expiration Date :
December
No of Contracts :
30
    

Stock Price :
$34.00
   
Buy/Sell :
Sell
    
Strike Price :
37.5 Call
 } Premium: $0.20
Expiration Date :
December
No of Contracts :
30
    

 

 

Investment @ Entry = (Premium of lower strike Leg x No of Contracts x 100 Shares) + (Premium of middle strike Leg x No of Contracts x 100 Shares) + (Premium of middle higher strike Leg x No of Contracts x 100 Shares) + (Premium of higher strike Leg x No of Contracts x 100 Shares) = ($12,900) + $6,450 + $2,400 + ($600) = Credit ($4,650)

Breakeven Point Down = lower strike + Net Credit = $30.00 + $1.55 = $31.55
Breakeven Point Up = higher strike - Net Credit = $37.50 - $1.55 = $35.95

 

Exit:

Best Case Scenario:

Stock Price :

 $30.00 down $4.00
   
Buy/Sell :
Sell
    
Strike Price :
30 Call
} Premium: $0.00
Expiration Date :
December

 

Stock Price :
$30.00 down $4.00
    
Buy/Sell :
Buy
    
Strike Price :
32.5 Call
 } Premium: $2.50
Expiration Date :
December

 

Stock Price :
$30.00 down $4.00
    
Buy/Sell :
Buy
    
Strike Price :
35 Call
 } Premium: $0.00
Expiration Date :
December

 

Stock Price :
$30.00 down $4.00
    
Buy/Sell :
Sell
    
Strike Price :
37.5 Call
 } Premium: $0.00
Expiration Date :
December

 

OR

Stock Price :

 $ 37.50 up $3.5
   
Buy/Sell :
Sell
    
Strike Price :
30 Call
} Premium: $7.50
Expiration Date :
December

 

Stock Price :
$37.50 up $3.5
    
Buy/Sell :
Buy
    
Strike Price :
32.5 Call
} Premium: $5.00
Expiration Date :
December

 

Stock Price :
$37.50 up $3.5
    
Buy/Sell :
Buy
    
Strike Price :
35 Call
} Premium: $2.50
Expiration Date :
December

 

Stock Price :
$37.50 up $3.5
    
Buy/Sell :
Sell
    
Strike Price :
37.5 Call
 } Premium: $0.00
Expiration Date :
December

 

 

Profit @ Exit = (Premium of lower strike Leg x No of Contracts x 100 Shares) + (Premium of middle strike Leg x No of Contracts x 100 Shares) + (Premium of middle higher strike Leg x No of Contracts x 100 Shares) + (Premium of higher strike Leg x No of Contracts x 100 Shares) – Investment @ Entry = $0 + $0 + $0 + $0 + $4,650 = $4,650

OR

Profit @ Exit = (Premium of lower strike Leg x No of Contracts x 100 Shares) + (Premium of middle strike Leg x No of Contracts x 100 Shares) + (Premium of middle higher strike Leg x No of Contracts x 100 Shares) + (Premium of higher strike Leg x No of Contracts x 100 Shares) – Investment @ Entry = $22,500 + ($15,000) + ($7,500) + $0 + $4,650 = $4,650

Return of Investment = Profit @ Exit / Investment @ Entry = 100%

 

Worst Case Scenario : (Difference between Strike Prices – Net credit) x No of Contracts

 

Stock Price
Profit/Loss
ROI

27.50

4650

100%

30.00

4650

100%

32.50

-2850

-61%

35.00

-2850

-61%

37.50

4650

100%

40.00

4650

100%