Description:
This sideways strategy is a combination of a bull put spread and a bear call spread and consists of a long position in an OTM put option with a strike price K1 , a short position in an OTM put option with a higher strike price K2 , a short position in an OTM call option with a strike price K3 , and a long position in an OTM call option with a higher strike price K4 . The strikes are equidistant: K4 − K3 = K3 − K2 = K2 − K1 = κ . This is a net credit trade. The trader’s outlook is neutral. This is an income strategy.
Understanding the Long Iron Condor
The Long Iron Condor is a neutral options strategy that is used when you expect the market to move moderately within a specific range during a set period. The strategy consists of four options on the same underlying asset:
Sell an Out-of-the-Money (OTM) Put: A put option with a strike price below the current price of the underlying asset is sold.