A Broken Wing Condor is an advanced options strategy that adjusts a standard iron condor to skew the risk-reward profile, typically aiming for a wider profit range on one side of the market. This structure mitigates downside risk while still capitalizing on price stability within a modified range or limited directional movement. It represents a precise calibration of multiple options contracts. In crypto institutional options trading, this strategy offers tailored risk exposure.
Mechanism
This strategy involves four options contracts with different strike prices and the same expiration date on an underlying crypto asset. It constructs two vertical spreads, one call spread and one put spread, but with an unequal distance between the strike prices of the options in one of the spreads, creating the “broken wing.” This adjustment alters the capital at risk and potential profit, reflecting a structural modification for specific market views.
Methodology
The strategic intent behind a Broken Wing Condor is to generate credit or reduce premium expenditure, often accepting a smaller potential maximum profit for a larger maximum loss capacity or a wider profitable range. Its application requires precise strike selection to account for expected volatility and directional bias, ensuring the strategy aligns with specific market outlooks and risk tolerance within crypto institutional options trading. Effective deployment depends on accurate volatility forecasts.
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