Josip Causic

Iron Condors vs. Condor Spreads

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Iron Condor at Expiry

IWM: $72.55 on June 20, 2008

The table below visually presents the facts that both the bear call and the bull put have expired worthless, therefore, allowing us to keep the maximum premium of $54 without paying any additional commission.

Three Major Differences Between Iron Condors and Condor Spreads

Now I will explain the three major differences between the iron condor and condor spreads.

1. Condor spreads are made up of the same class of options, either all call options or all put options.

The reverse side of condors is the iron condor, which by default consists of both calls and puts. Hence, in the future when you hear some trader mentioning an iron condor trade, there is no need for clarification as to which option class the trader used -- both were utilized.

Nevertheless, if the condor spread is mentioned the question remains: Was it a call condor spread or a put condor spread? The adjectives do make a big difference when it comes down to option trading.

2. The sold (or short) iron condor is basically a credit spread, which is not the case with the sold (or short) condor spread, which generally end up being a debit spread.

3. Usually the sold iron condor is composed of out-of-the-money options, whereas the condor spread could be composed of in-the-money options.

In conclusion, I have completed my explanation of a textbook example of an iron condor by focusing on the mathematical side of it. I have also described the three main differences between the iron condor and condor spreads.

Once again, be a net seller of premium at any given time, especially in the market conditions that we currently have.

Josip Cusic is an instructor with the Online Trading Academy. To learn more about him, read his bio here

This article originally appeared on The Options Insider Web site.