A long put condor option strategy uses four put options with four different strike prices, all expiring on the same day. You buy one put at the highest strike, sell one at the second highest, sell one at the second lowest, and buy one at the lowest strike. You pay an upfront net debit to establish the position. You use this trade when you expect the stock price to remain steady within the range created by the two middle strike prices.
The maximum profit is equal to the distance between adjacent strikes minus the net debit paid, achieved if the stock price closes between the two middle strike prices at expiration. The maximum loss is strictly capped at the initial net debit paid, which occurs if the stock ends up above the highest strike or below the lowest strike.
- Buy $110 Put for $11.00
- Sell $105 Put for $6.50
- Sell $95 Put for $1.50
- Buy $90 Put for $0.50
- Stock between $95 and $105: +$150 Max Profit
- Stock at $93.50 or $106.50: $0 Breakeven
- Stock ≤ $90 or ≥ $110: -$350 Max Loss