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Short Straddle (Sell Straddle or Naked Straddle) Vs Long Condor (Long Call Condor) Options Trading Strategy Comparison

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

Short Straddle (Sell Straddle or Naked Straddle) Vs Long Condor (Long Call Condor)

  Short Straddle (Sell Straddle or Naked Straddle) Long Condor (Long Call Condor)
Short Straddle (Sell Straddle or Naked Straddle) Logo Long Condor (Long Call Condor) Logo
About Strategy The Short Straddle (or Sell Straddle or naked Straddle) is a neutral options strategy. This strategy involves simultaneously selling a call and a put option of the same underlying asset, same strike price and same expire date. A Short Straddle strategy is used in case of little volatility market scenarios wherein you expect none or very little movement in the price of the underlying. Such scenarios arise when there is no major news expected until expire. This is a limited profit and unlimited loss strategy. The maximum profit earned when, on expire date, the underlying asset is trading at the strike price at which the options are sold. The maximum loss is unlimited and occurs when underlying asset price moves sharply in upward or down... Read More 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
Market View Neutral Neutral
Strategy Level Advance Advance
Options Type Call + Put Call
Number of Positions 2 4
Risk Profile Unlimited Limited
Reward Profile Limited Limited
Breakeven Point 2 Breakeven Points

When and how to use Short Straddle (Sell Straddle or Naked Straddle) and Long Condor (Long Call Condor)?

  Short Straddle (Sell Straddle or Naked Straddle) Long Condor (Long Call Condor)
When to use?

This strategy is to be used when you expect a flat market in the coming days with very less movement in the prices of underlying asset.

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.

Market View Neutral

When trader don't expect much movement in its price in near future.

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.

Action
  • Sell Call Option
  • Sell Put Option

  • 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.

Breakeven Point 2 Breakeven Points

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

Break-even points:

Lower Breakeven = Strike Price of Put - Net Premium

Upper breakeven = 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 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

Compare Risks and Rewards (Short Straddle (Sell Straddle or Naked Straddle) Vs Long Condor (Long Call Condor))

  Short Straddle (Sell Straddle or Naked Straddle) Long Condor (Long Call Condor)
Risks Unlimited

There is a possibility of unlimited loss in the short straddle strategy. The loss occurs when the price of the underlying significantly moves upwards and downwards.

Loss = Price of Underlying - Strike Price of Short Call - Net Premium Received

Or

Loss= Strike Price of Short Put - Price of Underlying - Net Premium Received

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.

Rewards Limited

Maximum profit is limited to the net premium received. The profit is achieved when the price of the underlying is equal to either strike price of short Call or Put.

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.

Maximum Profit Scenario Both Option not exercised

Both ITM Calls exercised

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

Maximum Loss Scenario

One Option exercised

All Options exercised or not exercised

Max Loss = Net Premium Paid

Pros & Cons or Short Straddle (Sell Straddle or Naked Straddle) and Long Condor (Long Call Condor)

  Short Straddle (Sell Straddle or Naked Straddle) Long Condor (Long Call Condor)
Advantages

It allows you to benefit from double time decay and earn profit in a less volatile scenario.

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.

Disadvantage

Unlimited losses if the price of the underlying move significantly in either direction.

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.

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







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