Iron Condor
An iron condor is an options trading strategy that involves buying and selling four different options contracts at the same time. It is a limited risk, non-directional options trading strategy that is designed to have a large probability of earning a small limited profit when the underlying security is perceived to have low volatility. The iron condor is constructed by selling one out-of-the-money (OTM) call and one OTM put, and then buying one further OTM call and one further OTM put. All options have the same expiration date and are equally far out-of-the-money.
History of the Iron Condor
The iron condor was first introduced in the early 2000s by options traders looking for a way to capitalize on low volatility in the markets. It quickly became a popular strategy among options traders due to its limited risk and potential for a small profit. The strategy is often used by traders who are looking to hedge their portfolios against market volatility.
Comparison Table
| Strategy | Risk | Profit Potential |
|---|---|---|
| Iron Condor | Limited | Small |
| Long Call | Unlimited | Unlimited |
| Long Put | Unlimited | Unlimited |
Summary
The iron condor is a limited risk, non-directional options trading strategy that is designed to have a large probability of earning a small limited profit when the underlying security is perceived to have low volatility. It is a popular strategy among options traders due to its limited risk and potential for a small profit. For more information about the iron condor, you can visit websites such as Investopedia, The Options Industry Council, and The Motley Fool.
See Also
- Long Call
- Long Put
- Short Call
- Short Put
- Straddle
- Strangle
- Butterfly Spread
- Calendar Spread
- Covered Call
- Protective Put
