Condors, like butterflies, require you to have an opinion on direction and a price target. Unlike butterflies, you can target a range in which you think the stock will be at expiration. Where a butterfly requires you to sell two options at a central strike price (which also is your price target), a condor could be profitable if the stock expires along a range of prices because it involves selling at two different strike prices. “Butterflies are very pretty and symmetrical; [condors] can be big and gawky. They look like they have trouble even getting up in the air,” Kearney says.
The advantage of a condor compared to a butterfly is it allows you to take a directional play, but it gives you a larger range where you may do pretty well. Like a butterfly, a condor is composed of either all calls or all puts.
Again, if we take our $63 stock, but this time we think it will be somewhere between $70 and $75 at expiration, a condor can let us maximize profit while limiting risk. To do this, we can buy a 65-70 bull call spread by buying the 65 call and selling the 70 call, and then selling a 75-80 bear call spread by selling the 75 call and buying the 80 call. Profit is maximized if we expire between $70-$75 and our wings give us protection should we miss our mark. Again, our maximum loss is the cost of the condor, plus commissions.