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Long Call Butterfly Vs Short Condor (Short Call Condor) Options Trading Strategy Comparison

Compare Long Call Butterfly and Short Condor (Short Call Condor) options trading strategies. Find similarities and differences between Long Call Butterfly and Short Condor (Short Call Condor) strategies. Find the best options trading strategy for your trading needs.

Long Call Butterfly Vs Short Condor (Short Call Condor)

  Long Call Butterfly Short Condor (Short Call Condor)
Long Call Butterfly Logo Short Condor (Short Call Condor) Logo
About Strategy Long Call Butterfly is a neutral strategy where very low volatility in the price of underlying is expected. The strategy is a combination of bull Spread and bear Spread. It involves Buy 1 ITM Call, Sell 2 ATM Calls and Buy 1 OTM Call. The strike prices of all Options should be at equal distance from the current price. Suppose Nifty is currently trading at 10400. You expect very little volatility in it. You can implement the Long Call Butterfly by buying 1 ITM Call Option at 10300, selling 2 ATM Nifty Call Options at 10400, buying 1 OTM Call Option at 10500. Ensure that strike prices of Options are at equidistance. Your loss will be limited to the net premium paid on 4 positions while profit will be limited to strike price of short calls.... Read More A Short Call Condor (or Short Condor) is a neutral strategy with a limited risk and a limited profit. The short condor strategy is suitable for a high volatile underlying. The goal of this strategy is to profit from a stock price moving up or down beyond the highest or lowest strike prices of the position. The strategy is similar to Short Call Butterfly strategy with the difference being in the strike prices selected. Suppose Nifty is currently trading at 10,400. If the trader is expecting high volatility in the index due to specific events i.e. budget, results, and elections, he could choose the Short Condor strategy to profit in such a market scenario. The strategy could be constructed as below: Short Condor Options Strategy ... Read More
Market View Neutral Volatile
Strategy Level Advance Advance
Options Type Call Call
Number of Positions 4 4
Risk Profile Limited Limited
Reward Profile Limited Limited
Breakeven Point

When and how to use Long Call Butterfly and Short Condor (Short Call Condor)?

  Long Call Butterfly Short Condor (Short Call Condor)
When to use?

This strategy should be used when you're expecting no volatility in the price of the underlying.

The Short Call Condor works well when you expect the price of the underlying to be very volatile. In other words, when the trader is anticipating massive price movements (in any direction) in the underlying during the lifetime of the options.

Market View Neutral

Neutral on the underlying asset and bearish on the volatility.

Volatile

When you are unsure about the direction in the movement in the price of the underlying but are expecting high volatility in it in the near future.

Action
  • Sell 2 ATM Call
  • Buy 1 ITM Call
  • Buy 1 OTM Call

Buy ITM Call Option + Buy OTM Call Option + Sell Deep OTM Call Option + Sell Deep ITM Call Option

Suppose Nifty is trading at 10,400. If you expect high volatility in the Nifty in the coming days then you can execute Short Call Condor by selling 1 ITM Nifty Call at 10,200, buying 1 ITM Call at 10,300, buying 1 OTM Call Option at 10, 500 and selling 1 OTM Nifty Call at 10, 600. Your maximum loss will be if Nifty closes in the range of 10,300 to 10,500 on expiry while maximum profit will be on either side of upper or lower strikes.

Breakeven Point

Upper Breakeven = Higher Strike Price - Net Premium

Lower Breakeven = Lower Strike Price + Net Premium


There are 2 break even points in this strategy. The upper break even is hit when the underlying price is equal to the difference between strike price of highest strike shot call and net premium paid. The lower break even is hit when the underlying price is equal to the strike price of lowest strike short call and net premium paid.

Lower Breakeven = Lower Strike Price + Net Premium

Upper breakeven = Higher Strike Price - Net Premium

Compare Risks and Rewards (Long Call Butterfly Vs Short Condor (Short Call Condor))

  Long Call Butterfly Short Condor (Short Call Condor)
Risks Limited

Risk in the Long Call Butterfly options strategy is limited to the net premium paid.

Limited

This is a limited risk strategy. The maximum risk in a short call condor strategy is calculated as below:

Max Loss = Strike Price of Lower Strike Long Call - Strike Price of Lower Strike Short Call - Net Premium Received + Commissions Paid

The max risk is when the price of the underlying remains in between strike price of 2 long calls.

Rewards Limited

Rewards in the Long Call Butterfly options strategy is limited to the adjacent strikes minus net premium debit.

Limited

The maximum profit in a short call condor strategy is realized when the price of the underlying is trading outside the range at time of expiration.<.p>

Max Profit = Strike Price of Lower Strike Short Call - Strike Price of Lower Strike Long Call - Net Premium Paid

Maximum Profit Scenario

Only ITM Call exercised

All options exercised or not exercised

Maximum Loss Scenario

All options exercised or all options not exercised.

Both ITM Calls exercised

Pros & Cons or Long Call Butterfly and Short Condor (Short Call Condor)

  Long Call Butterfly Short Condor (Short Call Condor)
Advantages

Profit earning strategy with limited risk in a less volatile market.

It allows you to profit from highly volatile underlying assets moving in any direction.

The maximum profit for the condor trade may be low in relation to other trading strategies but it has a comparatively wider profit zone.

Earn profit with little or no investment as you will have a credit of net premiums.

Disadvantage

Premiums and brokerage paid on multiple position may eat your profits.

Strike prices selected may have an impact on the potential of profit.

Brokerage and taxes make a significant impact on the profits from this strategy. The cost of trading increases with the number of legs. This strategy has 4 legs and thus the brokerage cost is higher.

Simillar Strategies Long Put Butterfly, Short Call Condor, Short Strangle







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