Put Condor Spread

The Put Condor Spread is a non-directional, limited-risk options strategy that benefits from the underlying asset staying within a defined price range. It consists of four put options at ascending strike prices and creates a "tent-shaped" payoff profile, making it ideal for rangebound markets with low implied volatility.

Structure

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

All options share the same expiration date. Strikes are typically spaced evenly for symmetry.

Profit & Loss Profile

• Maximum Profit: Realized if the asset closes between Strike B and Strike C at expiration
• Maximum Risk: Limited to the net debit paid when entering the trade
• Breakeven Points:
  • Lower Breakeven = Strike B - Net Debit
  • Upper Breakeven = Strike C + Net Debit
• Payoff Shape: Tent-like curve with flat loss zones outside the breakeven points

Example

A stock is trading at $100. A trader sets up a Put Condor with the following strikes:

• Buy 1 x $90 Put
• Sell 1 x $95 Put
• Sell 1 x $105 Put
• Buy 1 x $110 Put

The strategy profits most if the stock settles between $95 and $105. The wings ($90 and $110) provide insurance against sharp drops, while the center short puts capture premium.

Ideal Market Conditions

• Outlook: Neutral—expecting limited price movement
• Volatility: Low to moderate implied volatility preferred
• Time Frame: Suited for short- to medium-term trades
• Goal: Generate income with defined risk

Risk Considerations

• If the underlying moves outside the wings, losses are capped but guaranteed
• Requires margin for multiple short legs
• May be difficult to execute with tight bid-ask spreads on far OTM options
• Less favorable in high-volatility markets or breakout scenarios

Summary

The Put Condor Spread is ideal for traders seeking a defined-risk structure in sideways markets. Its cost efficiency and rangebound profit zone make it a popular choice for neutral forecasts and volatility plays.