Long Call Condor  can consist of either a call option contract or a put option contract.

The two different contract types make up two combinations of Long Condors: buying an Long Call Condor and buying an Long Put Condor.

Take Long Call Condor as an example. If you expect the underlying asset to fluctuate sideways in a certain range in the future and are unwilling to take too much risk, you can use a Long Call Condor strategy.

How to build

Long Call Condorn consists of four options trades

● Buy 1 call 1

● Sell 1 copy of Call2

● Sell 1 copy of Call3

● Buy 1 copy of Call4

The number, underlying assets, and expiration dates of Call, Call2, Call3, and Call4 are all the same. The differences are as follows:

Exercise price: call1＜call2＜call3＜call4, call4-call3=call2-call1

Strategy brief

To Long Call Condor, generally, open a position by buying a real call1 with a low interest price, selling a real call2 with a medium to low trading price, selling an imaginary call3 with a medium to high trading price, and then buying an imaginary call4 with a higher share price.

Among them, the difference between call2 and call1 exercise price is equal to the difference between call4 and call3.

The difference between the exercise price of the two options in the middle can be adjusted flexibly according to one's own judgment on the market. The four exercise price equivalents are a general form Long Call Condor.

The underlying asset, maturity date, and quantity of all options are the same.

If you take this combination apart, it's actually a combination of a bull market spread and a bear market spread.

Buying call1 and selling 1 copy of call2 is the spread of a bullish call option; selling 1 copy of call3 and buying call2 is the spread of a bearish bullish option.

When the stock price is higher than the highest exercise price or lower than the minimum exercise price, the strategy makes the biggest loss; when the stock price falls between the two middle exercise prices, the strategy gains the most profit.

When analyzing this combination of strategies, we are still starting from the construction motivations.

Selling 2 call options in the middle is the main part of this strategy to achieve profits under the expectation that “there will be no major change in stock prices.” However, buying a call option on both sides is used to hedge the risk of selling a call option.

This strategy is suitable for investors who have a high degree of confidence in the upper and lower limits of stock price fluctuations, and at the same time are risk-averse.

More professional investors will adjust their strategies at any time according to market changes after opening a portfolio of options strategies.

Since buying hawk-style call options is a 4-legged strategy, it is relatively more flexible. In actual use, professional investors will “break up” it in order to reap more cost-effective return on risk.

It was also mentioned earlier that it is actually a combination of the spread of bullish options in a bear market and a bull market. Therefore, in actual application, the 4-leg strategy can be split into 3 legs, 2 legs, or even 1 leg according to market changes, but this is an advanced form of gameplay; everyone only needs to understand it; it won't unfold here in the basic definition.

Generally, when opening a position, the revenue from selling an option with an hawk spread will be slightly less than the cost of buying an option, so at the beginning of strategy construction, the strategy showed a net outflow on the book.

This is also one of the differences between a buy hawk spread strategy and a sell hawk spread strategy. Normally, the selling hawk spread combination shows a net inflow on the book when opening a position.

It should be noted that Long Call Condor requires trading 4 options, and trading 8 options back and forth. The transaction cost is relatively high, and the actual cost needs to be calculated during actual use.

Risks and benefits

● Break-even point

Low break-even point: stock price = low exercise price - net option premium

High break-even point: stock price = high exercise price+net option premium

● Maximum profit

Maximum return = high exercise price - medium to high exercise price+net option premium

● Maximum loss

Net option premium

Examples of calculations

Assuming that in the US stock market, TUTU's current stock price is 52 US dollars. You think TUTU will probably fluctuate between 48-56 US dollars in the future, and at the same time want to limit risk, so I created a buy hawk-style bullish option:

Buy 1 call with an exercise price of $48 at a price of $6;

Sell 1 call at a price of 4 US dollars with an exercise price of 50 US dollars;

Sell 1 call at a price of 2 US dollars with an exercise price of 54 US dollars;

Buy 1 call with an exercise price of 56 US dollars at the price of 1 US dollar;

At maturity, your earnings will be as follows:

Explanation:

1. The article uses stocks as option targets to explain strategies. The actual investment bid can also be stock indices, futures contracts, bonds, currencies, etc.;

2. Unless otherwise specified, all options in this article refer to on-market options;

3. The TUTU company in the article is a virtual company;

4. The relevant calculations in this article do not take into account handling fees. In actual options investment, investors need to consider transaction costs.