Call Condor Spread

The Call Condor Spread is a neutral options strategy designed to profit from low volatility in the underlying asset. It involves four call options at different strike prices—forming a “condor-like” shape in the payoff diagram. The strategy offers limited risk and limited reward and is typically constructed for a net debit.

Structure

• Buy 1 Call at Strike A (lowest strike)
• Sell 1 Call at Strike B (second lowest strike)
• Sell 1 Call at Strike C (third strike)
• Buy 1 Call at Strike D (highest strike)

All options share the same expiration date. Strikes are equidistant for a classic symmetrical condor.

Profit & Loss Profile

• Maximum Profit: Achieved when the underlying settles between Strike B and Strike C
• Maximum Risk: Limited to the net premium paid (initial debit)
• Breakeven Points:
  • Lower Breakeven: Strike B minus net debit
  • Upper Breakeven: Strike C plus net debit
• Payoff Shape: Tent-like payoff with flat loss regions outside and capped profit zone inside

Example

Assume a stock is trading at $100. A trader constructs the following call condor:

• Buy 1 x $95 Call
• Sell 1 x $100 Call
• Sell 1 x $105 Call
• Buy 1 x $110 Call

If the stock closes between $100 and $105 at expiration, the strategy yields its maximum profit. Outside this range, losses are capped at the initial debit.

Ideal Market Conditions

• Outlook: Neutral or rangebound
• Volatility: Low implied volatility preferable
• Time Frame: Typically short to medium term
• Expectations: Underlying remains within the middle strikes' range

Risk Considerations

• Maximum loss occurs if underlying is below Strike A or above Strike D at expiration
• Slippage and assignment risk if held close to expiration and options are in-the-money
• Limited liquidity for wide or exotic strike spacing
• Greek exposure to Theta (time decay) and Vega (volatility changes)

Summary

The Call Condor Spread is ideal for traders seeking income in a non-trending market with capped exposure. Its limited risk profile makes it attractive for defined-outcome strategies, especially when volatility is low and price movement is expected to be minimal.