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Short Strangle (Sell Strangle) Vs Short Condor (Short Call Condor) Options Trading Strategy Comparison

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

Short Strangle (Sell Strangle) Vs Short Condor (Short Call Condor)

  Short Strangle (Sell Strangle) Short Condor (Short Call Condor)
Short Strangle (Sell Strangle) Logo Short Condor (Short Call Condor) Logo
About Strategy The Short Strangle (or Sell Strangle) is a neutral strategy wherein a Slightly OTM Call and a Slightly OTM Put Options are sold simultaneously of same underlying asset and expiry date. This strategy can be used when the trader expects that the underlying stock will experience a very little volatility in the near term. It is a limited profit and unlimited risk strategy. The maximum profit earn is the net premium received. The maximum loss is achieved when the underlying moves either significantly upwards or downwards at expiration. A net credit is taken to enter into this strategy. For this reason, the Short Strangles are Credit Spreads. The usual Short Strangle Strategy looks like as below for NIFTY current index value at 10400 (NIFTY S... 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 + Put Call
Number of Positions 2 4
Risk Profile Unlimited Limited
Reward Profile Limited Limited
Breakeven Point two break-even points

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

  Short Strangle (Sell Strangle) Short Condor (Short Call Condor)
When to use?

The Short Strangle is perfect in a neutral market scenario when the underlying is expected to be less volatile.

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 expecting little volatility and movement in the price of the underlying.

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 OTM Call
  • Sell OTM Put

Sell 1 out-of-the-money put and sell 1 out-of-the-money call which belongs to same underlying asset and has the same expiry date.

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 strangle has two break-even points.

Lower Break-even = Strike Price of Put - Net Premium

Upper Break-even = 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 (Short Strangle (Sell Strangle) Vs Short Condor (Short Call Condor))

  Short Strangle (Sell Strangle) Short Condor (Short Call Condor)
Risks Unlimited

The maximum loss is unlimited in this strategy. You will incur losses when the price of the underlying moves significantly either upwards or downwards at expiration.

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

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

For maximum profit, the price of the underlying on expiration date must trade between the strike prices of the options. The maximum profit is limited to the net premium received while selling the Options.

Maximum Profit = Net Premium Received

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

Both Option not exercised

All options exercised or not exercised

Maximum Loss Scenario

One Option exercised

Both ITM Calls exercised

Pros & Cons or Short Strangle (Sell Strangle) and Short Condor (Short Call Condor)

  Short Strangle (Sell Strangle) Short Condor (Short Call Condor)
Advantages

The strategy offers higher chance of profitability in comparison to Short Straddle due to selling of OTM Options.

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

Limited reward with high risk exposure.

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