The Condor Spread Strategy is an advanced options trading technique designed to profit from low volatility and range-bound price behaviour. It combines four options contracts of the same type (calls or puts) with different strike prices but the same expiration date. The strategy offers limited risk and limited reward, and is ideal when a trader expects minimal movement in the underlying currency pair or asset before expiry.

Condor spreads are frequently used in FX options trading around central bank meetings, geopolitical events, or holidays, where implied volatility is elevated but the trader expects a tight trading range.

What Is a Condor Spread?

There are two main types:

• Call Condor: Uses four call options
• Put Condor: Uses four put options

A Long Condor Spread typically involves:

1. Buy 1 lower strike option (e.g. long 1.0850 call)
2. Sell 1 low-middle strike option (e.g. short 1.0900 call)
3. Sell 1 high-middle strike option (e.g. short 1.0950 call)
4. Buy 1 higher strike option (e.g. long 1.1000 call)

All options have the same expiry. This creates a defined profit zone between the two short strikes, with maximum profit if the underlying expires between them.

How the Strategy Works

1. Establish a Long Condor
   Buy the wings (lower and upper strike) and sell the body (middle strikes) of the condor.
2. Profit in a Narrow Range
   Maximum gain occurs if the underlying stays between the two middle strikes at expiry.
3. Manage Limited Risk
   Your risk is confined to the net premium paid to establish the trade.
4. Exit Before or at Expiry
   Close early to lock in profits, or let it expire if the underlying remains in range.

Example: EUR/USD Call Condor

• Outlook: EUR/USD expected to trade between 1.0900 and 1.0950 ahead of ECB
• Long 1.0850 call
• Short 1.0900 call
• Short 1.0950 call
• Long 1.1000 call
• Expiry: All options expire in 7 days
• Max profit: If EUR/USD expires between 1.0900 and 1.0950
• Max loss: Net premium paid for the condor

Ideal Market Conditions

• Low Volatility Environment
• Expected Range-Bound Movement
• Post-News Consolidation
• High Implied Volatility to Sell

Benefits of the Condor Spread Strategy

• Limited Risk and Reward: Clear profit/loss boundaries
• High Probability Setup: Works well when price stays within range
• Flexibility: Can be structured tighter (Iron Condor) or wider for conservative returns
• Non-Directional: Profit without predicting direction

Risks and Limitations

• Profit Only in a Narrow Range: Large moves in either direction reduce gains
• Complex Structure: Four legs require precision and active management
• Time Sensitivity: Profit zone increases as expiry approaches, but decay may hurt early
• Bid-Ask Spread Impact: May reduce profitability, especially in less liquid FX options

Risk Management Tips

• Structure Around Key Technical Levels: Use support/resistance to choose strikes
• Avoid Holding Into Expiry If Volatility Spikes: Close early to lock in gains
• Use High-IV Environments: Sell condors when implied volatility is rich
• Choose Liquid Pairs: EUR/USD, GBP/USD, USD/JPY for tight spreads

Use Case: GBP/USD Condor During BOE Quiet Period

• BOE meeting has passed, and no major data is due
• GBP/USD expected to remain in 1.2650–1.2750
• Trader sets up a call condor with short strikes at 1.2675 and 1.2725
• Max profit occurs if GBP/USD stays within this range at expiry

Conclusion

The Condor Spread Strategy offers a smart way to generate income from stagnant markets with well-defined risk. By carefully selecting strike prices and using high-IV periods to sell expensive options, traders can profit when the market does very little — a scenario often overlooked by directional strategies.

To master condors, spreads, and premium collection in range-bound markets, enrol in our professional Trading Courses designed for options-focused and volatility-driven traders.