how to create iron condor spread in excel? by using put, calls, and/or premium

Expert Solution

An iron condor spread is created by :

Long 1 at-the-money call option
Long 1 at-the-money put option
Short 1 out-of-the-money call option
Short 1 out-of-the-money put option

For example, we take the following spread :

Long 1 $100 call with premium $3.50
Long 1 $100 put with premium $2.00
Short 1 $105 call with premium $1.00
Short 1 $95 put with premium $0.50

Payoff of a long call option = Max[S-X, 0] - P

Payoff of a short call option = P - Max[0, S-X]

Payoff of a long put option = Max[X-S, 0] - P

Payoff of a short put option = P - Max[0, X-S]

S = underlying price at expiry,

X = strike price

P = premium paid or received (long options involve paying premium, and short options receive premium)

The payoffs of the iron condor spread are calculated as below :

The formulas are shown below :

Thus, an iron condor spread is created

jeff jeffy answered 2 years ago

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