Outlook: Neutral
Long Iron Condor - Buy one lower strike put, sell one middle lower strike put, sell one higher middle strike call and buy one higher strike call.
Strategies...
- Buy ONE lower Strike Put (OTM)
- Sell ONE lower middle strike Put (OTM) with same expiration.
- Sell ONE higher middle strike Call (OTM) with same expiration.
- Buy ONE higher Strike Call (OTM) with same expiration.
- Seeking for little movement in the stock.
- Maximum profit if the the stock at between the lower middle and higher middle strike price.
- Preferably options with one month or less to expiration.
Linkedin Corporation(NYSE:LNKD), is traded at $92.50 on June, 2012. To do a Long Iron Condor.
- Buy July 2012 $85 Put at $1.40.
- Sell July 2012 $90 Put at $2.60.
- Sell July 2012 $95 Call at $2.20.
- Buy July 2012 $100 Call at $0.80.
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| Long Iron Condor |
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| Long Iron Condor |
Advantages...
- Profit from little movement in the stock.
- Premium gain and capped downside risk.
Disadvantages...
- Narrow range for high profit.
Premium Gain: $2.60 + $2.20 - $1.40 - $0.80 = $2.60
Maximum Profit: Premium gain
Maximum Loss: $5.00 - $2.60 = $2.40
(Different in strike - premium gain)
Breakeven Up: $95.00 + $2.60 = $97.60
(Upper Middle Strike Price + Premium gain)
Breakeven Down : $90.00 - $2.60 = $87.40
(Lower Middle Strike Price - Premium gain)
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