Question

Explain how to build an Iron condor, what are the purposes of an iron condor strategy? Build a real life iron condor for an American publicly traded stock of your choice, pull the options contracts and paste them on the answer. Please explain each part of it, what the credit or debit will be for the transaction, include every detail of each option contract you will use to build the iron condor trade.

Answer 1

An iron condor is an option strategy where we sell out of the money (below or above the current price)

Put and call options as well as buy put and call options of a lower(put) and higher strike(call) respectively   The difference between the Premiums is our profit . The purpose of the iron condor is to benefit when

the stock price does not change much and the options expire worthless.

Iron Condor with Google Inc.

Current price of Google stock   $ 1,159.98

Call options :

GOOG Jul 2018 1162.500 call price         5.00                         sell          strike price 1162

GOOG Jul 2018 1167.500 call        price      3.51                        buy                       strike price 1167

Difference in premium 5- 3.51 = $ 1.49

Put options :

GOOG Jul 2018 1157.500 put price        7.94           sell                                          strike 1157

GOOG Jul 2018 1152.500 put price        4.60          buy                                          strike 1152

Difference in premium 7.94 – 4.60   = $ 3.34

If the price of Google stock remains in between $1162 and $ 1157 all the options expire worthless

And the profit is 1.49 + 3.34 = $ 4.83 . If the price moves beyond 1162 we exit the call option. If the

Stock moves below 1157 we exit the put options.