A short put condor option strategy involves selling four put options at four distinct strike prices with identical expiration dates. You sell the lowest strike put, buy the second lowest, buy the second highest, and sell the highest strike put. This combination generates a net credit upfront. Investors apply this technique when they anticipate significant stock price movement away from the current price level in either direction.
Your maximum profit is capped at the initial net credit collected, achieved if the stock price ends up below the lowest strike or above the highest strike at expiration. The maximum loss occurs if the stock price closes squarely between the two middle strike prices, equal to the width between adjacent strike prices minus the net credit received.
- Sell $110 Put for $11.00
- Buy $105 Put for $6.50
- Buy $95 Put for $1.50
- Sell $90 Put for $0.50
- Stock ≤ $90 or ≥ $110: +$350 Max Profit
- Stock at $93.50 or $106.50: $0 Breakeven
- Stock between $95 and $105: -$150 Max Loss