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Long Condor (Long Call Condor) Vs Covered Strangle Options Trading Strategy Comparison

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

Long Condor (Long Call Condor) Vs Covered Strangle

  Long Condor (Long Call Condor) Covered Strangle
Long Condor (Long Call Condor) Logo Covered Strangle Logo
About Strategy A Long Call Condor is a neutral market view strategy with a limited risk and a limited profit. The long call condor investor is looking for little or no movement in the underlying. It is a 4 leg strategy which involves buying 2 ITM Calls and 2 OTM Calls at different strike price with the same expiry date. The strategy is similar as long butterfly strategy with the difference being in the strike prices selected. Suppose Nifty is currently trading at 10,400. The long call condor strategy can be used if expect very little volatility in the index and market to largely remain range bound. To profit in such a market scenario lets: Long Call Condor Options Strategy OrdersExample NIFTY Strike Price Buy 1 ITM CallNIFTY18APR10200C... Read More The covered strangle option strategy is a bullish strategy. The strategy is created by owning or buying a stock and selling an OTM Call and OTM Put. It is called covered strangle because the upside risk of the strangle is covered or minimized. The strategy is perfect to use when you are prepared to sell the holding or bought shares at a higher price if the market moves up but would also is ready to buy more shares if the market moves downwards. The profit and in this strategy is unlimited while the risk is only on the downside.
Market View Neutral Bullish
Strategy Level Advance Advance
Options Type Call Call + Put + Underlying
Number of Positions 4 3
Risk Profile Limited Limited
Reward Profile Limited Limited
Breakeven Point two break-even points

When and how to use Long Condor (Long Call Condor) and Covered Strangle?

  Long Condor (Long Call Condor) Covered Strangle
When to use?

The Long Call Condor works well when you expect the price of the underlying to be range bound in the coming days. In other words, when the trader is anticipating minimal price movement in the underlying during the lifetime of the options.

A covered strangle strategy can be used when you are bullish on the market but also want to cover any downside risk. You are prepared to sell the shares on profit but are also willing to buy more shares in case the prices fall.

Market View Neutral

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

Bullish

The Strategy is perfect to apply when you're bullish on the market and expecting less volatility in the market.

Action
  • Buy Deep ITM Call Option
  • Buy Deep OTM Call Option
  • Sell ITM Call Option
  • Sell OTM Call Option

Suppose Nifty is currently trading at 10,400. You expect little volatility in the index and market to largely remain range bound. To profit in such a market scenario, you can buy buy 1 ITM Nifty Call Option at 10,200, sells 1 ITM Nifty Call Option 10,300, sell 1 OTM Call Option at 10,500 and buy 1 OTM Nifty Call Option at 10,800. The Net debit of premium is the maximum possible loss while your maximum profit will be when Nifty is between the strike prices of 2 short calls on expiry.

Buy 100 shares + Sell OTM Call +Sell OTM Put

The covered strangle options strategy can be executed by buying 100 shares of a stock while simultaneously selling an OTM Put and Call of the same the stock and similar expiration date.

Breakeven Point

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 higher strike price and net premium paid. The lower break even is hit when the underlying price is equal to the total of lower strike price and net premium paid.

Lower Breakeven = Lower Strike Price + Net Premium

Upper breakeven = Higher Strike Price - Net Premium

two break-even points

There are 2 break-even points in the covered strangle strategy. One is the Upper break even point which is the sum of strike price of the Call option and premium received while the other is the lower break-even point which is the difference strike price of short Put and premium received.

Compare Risks and Rewards (Long Condor (Long Call Condor) Vs Covered Strangle)

  Long Condor (Long Call Condor) Covered Strangle
Risks Limited

The maximum risk in a long call condor strategy is equal to the net premium paid at the time of entering the trade. The max risk is when the price of the underlying equal to or below the lower strike price or when the underlying price is equal to or above the higher strike price of Options in trade at expiration time.

Limited

The risk on this strategy is only on the downside when the price moves below the strike price of the Put option.

Rewards Limited

The maximum profit in a long call condor strategy is realized when the price of the underlying is trading between the two middle strikes at time of expiration.

Limited

The maximum profit on this strategy happens when the stock price is above the call price on expiry. The profit is the total of the gain from buying/selling stocks and net premium received on selling options.

Maximum Profit Scenario

Both ITM Calls exercised

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

You will earn the maximum profit when the price of the stock is above the Call option strike price on expiry. You will be assigned on the Call option, would be able to sell holding shares on profit while retaining the premiums received while selling the options.

Maximum Loss Scenario

All Options exercised or not exercised

Max Loss = Net Premium Paid

The maximum loss would be when the stock price falls drastically and turns worthless. The premiums received while selling the options will compensate for some of the loss.

Pros & Cons or Long Condor (Long Call Condor) and Covered Strangle

  Long Condor (Long Call Condor) Covered Strangle
Advantages

It allows you to profit from range bound underlying at low capital. The profit is high with limited risk exposure.

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

  • As the strategy involves buying shares when prices fall, there is long-term gain even if their short-term loss.
  • There is no upside risk due to the long position in stocks.
  • Allows you to earn income in a moderately bullish market.
Disadvantage

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

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

  • The substantial risk when the price moves downwards.
  • Risk of assignments.
Simillar Strategies Long Put Butterfly, Short Call Condor, Short Strangle Long Strangle, Short Strangle