Iron Condor options trading Strategy - Stock market Technical analysis #shorts #krinu

Iron condor is a four legged options trading strategy in which the investor Buys an OTM Put option lower strike and Sells ATM Put option with higher strike

further he buys an OTM Call option lower strike and sells an OTM Call option with a higher strike, thus ensuring an equal spread range in strikes he chooses

Iron condor is a credit strategy which results in a net credit to construct the strategy as shown in this example

now if the market is bullish at the time of expiry Leg-2 ( Put sold )and Leg-4 (Call bought ) will incur profit which will offset the loss from Leg-3( sold Call ) and Leg-1 (Bought Put) in this example,

if the market turns Bearish at the time of Expiry Leg-3 (Sold Call) and Leg-1 (Bought Put) will incur Profit which offsets the loss from the other two Leg's (Leg-2 & Leg-4)

In Iron condor strategy the Maximum profit is achieved when the market trades with in the range of Leg-2 and Leg-3 in which the higher premiums received by selling one Put and One Call, is the profit , where as the other two premium's he had paid (Leg-1 & Leg-4) will be his loss .

hence Iron condor strategy can be called as an improvised or enhanced Version of a Short Strangle with an upper and lower Shield to protect the investor from extreme market movement (upside or down side), but the investor here in this strategy needs to mange four contracts and the cost of constructing this strategy can be higher than Short strangle since you buy two contracts and pay premiums here.

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