What Is a Bull Condor Spread?
A Bull Condor Spread is an extension of the Bull Butterfly strategy, but instead of 3 strikes, it uses 4 strike prices.
- Risk: Limited
- Reward: Limited
- Cost: Low (net debit)
- Best Use Case: When you expect the underlying to stay in a moderately bullish range.
The payoff looks like a “plateau”, where the profit zone is wider compared to a Butterfly spread.
🔹 How It Works
You set up 4 Call options with the same expiry but different strike prices:
- Buy 1 Lower Strike Call (ITM)
- Sell 1 Second Strike Call (slightly OTM)
- Sell 1 Third Strike Call (further OTM)
- Buy 1 Higher Strike Call (far OTM)
This creates a condor-shaped payoff with capped profit and capped loss.
🔹 Example
- Underlying: Nifty at 20,000
- Setup: Bull Call Condor
- Buy 19,800 CE at ₹300
- Sell 20,000 CE at ₹200
- Sell 20,200 CE at ₹120
- Buy 20,400 CE at ₹60
Net Premium Paid = 300 – 200 – 120 + 60 = ₹40 (Net Debit)
🔹 Payoff Scenarios
- If Nifty closes between 20,000 and 20,200 (Profit Zone)
- At 20,100:
- 19,800 CE = ₹300 intrinsic
- 20,000 CE = –₹100
- 20,200 CE = worthless
- 20,400 CE = worthless
- Net Intrinsic = ₹200 – 40 = ₹160 Profit
- Max Profit occurs in this middle zone (between the 2 short strikes).
- At 20,100:
- If Nifty closes below 19,800
- All options expire worthless.
- Loss = ₹40 (Net Premium Paid).
- If Nifty closes above 20,400
- 19,800 CE = ₹600
- 20,000 CE = –₹400
- 20,200 CE = –₹200
- 20,400 CE = worthless
- Net = 0 – 40 = ₹40 Loss (Max Loss)
🔹 Strategy Summary
- Market View: Neutral to Moderately Bullish
- Max Risk: Limited to net premium paid (₹40 in this case)
- Max Reward: Limited (profit when expiry is between the 2 middle strikes)
- Best Case: Underlying closes between 20,000 and 20,200
- Worst Case: Price falls below 19,800 or rises above 20,400
📌 Bull Butterfly vs Bull Condor
- Butterfly: Small cost, sharp profit at one middle strike (narrow zone).
- Condor: Small cost, profit zone is wider and safer, but maximum profit is slightly lower.
