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Long Strangle (Buy Strangle) Vs Short Condor (Short Call Condor) Options Trading Strategy Comparison

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

Long Strangle (Buy Strangle) Vs Short Condor (Short Call Condor)

  Long Strangle (Buy Strangle) Short Condor (Short Call Condor)
Long Strangle (Buy Strangle) Logo Short Condor (Short Call Condor) Logo
About Strategy The Long Strangle (or Buy Strangle or Option Strangle) is a neutral strategy wherein Slightly OTM Put Options and Slightly OTM Call are bought simultaneously with same underlying asset and expiry date. This strategy can be used when the trader expects that the underlying stock will experience significant volatility in the near term. It is a limited risk and unlimited reward strategy. The maximum loss is the net premium paid while maximum profit is achieved when the underlying moves either significantly upwards or downwards at expiration. The usual Long Strangle Strategy looks like as below for NIFTY current index value at 10400 (NIFTY Spot Price): Options Strangle Orders OrdersNIFTY Strike Price Buy 1 Slightly OTM PutN... 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 Beginners Advance
Options Type Call + Put Call
Number of Positions 2 4
Risk Profile Limited Limited
Reward Profile Unlimited Limited
Breakeven Point two break-even points

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

  Long Strangle (Buy Strangle) Short Condor (Short Call Condor)
When to use?

A Long Strangle is meant for special scenarios where you foresee a lot of volatility in the market due to election results, budget, policy change, annual result announcements etc.

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

When you are unsure of the direction of the underlying but expecting high volatility in it.

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
  • Buy OTM Call Option
  • Buy OTM Put Option

Suppose Nifty is currently at 10400 and you expect the price to move sharply but are unsure about the direction. In such a scenario, you can execute long strangle strategy by buying Nifty at 10600 and at 10800. The net premium paid will be your maximum loss while the profit will depend on how high or low the index moves.

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 two break-even points

A Options Strangle strategy has two break-even points.

Lower Breakeven Point = Strike Price of Put - Net Premium

Upper Breakeven Point = Strike Price of Call + 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 Strangle (Buy Strangle) Vs Short Condor (Short Call Condor))

  Long Strangle (Buy Strangle) Short Condor (Short Call Condor)
Risks Limited

Max Loss = Net Premium Paid

The maximum loss is limited to the net premium paid in the long strangle strategy. It occurs when the price of the underlying is trading between the strike price of Options.

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 Unlimited

Maximum profit is achieved when the underlying moves significantly up and down at expiration.

Profit = Price of Underlying - Strike Price of Long Call - Net Premium Paid

Or

Profit = Strike Price of Long Put - Price of Underlying - Net Premium Paid

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

One Option exercised

All options exercised or not exercised

Maximum Loss Scenario

Both Option not exercised

Both ITM Calls exercised

Pros & Cons or Long Strangle (Buy Strangle) and Short Condor (Short Call Condor)

  Long Strangle (Buy Strangle) Short Condor (Short Call Condor)
Advantages

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

The strategy requires significant price movements in the underlying to gain 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 Straddle, Short Strangle Long Put Butterfly, Short Call Condor, Short Strangle







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