The Broken Wing Condor Spread, also known as a Skip Strike Condor Spread, is
neutral options strategy and is a variant of the Condor Spread options trading strategy. The Broken Wing Condor Spread
is simply a Condor Spread which has risk inclined to one side. This means that rather than an equal risk when the stock breaks out
to topside or downside, the Broken Wing Condor Spread transfers all the risk in one direction onto the other in order to create
a options trading risk profile with limited loss when the stock goes either upwards or downwards and totally safe when the stock goes in
the protected direction.
The Broken Wing Condor Spread also differs from the Condor Spread in that it is usually put on as a zero cost spread or credit spread.
The main purpose of a Broken Wing Condor Spread options trading strategy is simply to adjust the risk profile of a regular Condor Spread.
A regular Condor Spread makes a loss when the stock breaks out to either direction. A Broken Wing Condor Spread enables you to totally
transfer the risk of one direction onto the other. This is useful when you wish to speculate on a stock being stagnant but that you are
confident that if the stock should break out, it will do so only in a certain direction.
The Broken Wing Condor Spread options trading strategy does this by simply buying out of the money options with a further strike price from the short strike than the in the money leg. A regular Condor Spread would have both out of the money options and in the money options at an equidistance strike price from their short strikes.
|Regular Condor Spread
|Broken Wing Condor Spread
|Two long strikes at equidistance from short strikes
|Out of the money strike is further from the short OTM strike
|Zero Cost or Credit Spread
|Lower margin requirement
|Higher margin requirement
|Lower Maximum Loss/Profit
|Higher Maximum Loss/Profit
Please click on the respective risk graph to learn about each variant of the Broken Wing Condor Spread.
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