What’s the difference between a Butterfly over 3 consecutive strikes and a Condor over 4 consecutive strikes (including the Butterflies’ 3 strikes)?

 

Answer: Another Butterfly with 3 consecutive strikes involving the Condor’s 4th strike.  -- Again, (altogether class…). “Who cares?” 

OK, if you started with a 3 strike butterfly and the market was threatening to push out of your target range, you might care to stretch your win range (adjusting into a condor) with the purchase of the adjacent butterfly.

If you had the condor, winning as time wound down to expiration, you might wish to harvest* the beefier of the two adjacent butterflies and leave the cheaper butterfly to perhaps blossom for additional profit. 

Using the Risk Doctor’s New Risk Illustrator Software, we can see that if we Buy 10 FEB 60/65/70/75 Call Condors and Sell 10 FEB 60/65/70 Butterflies, the result (difference) is 10 FEB 65/70/75 Butterflies.

Legend:

Long 10 FEB 60/65/70/75 Call Condors: Green Dashed Line and Highlights.

Short 10 FEB 60/65/70 Butterflies: Red Dashed Line and Highlights.

Long 10 FEB 65/70/75 Butterflies: Pink Solid Line and Highlights.

 

*More details on this subject in Chapter 6 of “Options Trading: The Hidden Reality”.