Learn iron condor — Hinglish notes

5.4.8 · Stock-Market › Options Strategies

Iron Condor KYA hai?

KYUN chaar legs?

Do short options ( $K_{2}, K_{3}$ ) premium collect karte hain — yahi teri income hai.
Do long options ( $K_{1}, K_{4}$ ) har side pe tera loss cap karte hain — yehi isse defined risk banata hai (naked strangle ke unlike, jisme unlimited loss hota hai).

Payoff KAISE banayein — first principles se

Hum profit formula kabhi memorize nahi karte. Hum isse derive karte hain, expiry pe chaaon legs ke payoffs add karke. Maano $S$ = expiry pe stock price, $C$ = net credit received per share.

Ek single long option ka expiry pe payoff:

Long call struck $K$ : $max (S - K, 0)$
Long put struck $K$ : $max (K - S, 0)$

Ek short option sirf long wale ka negative hota hai.

$C$ kyun add karte hain? Kyunki tune trade open karte waqt $C$ receive kiya tha; yeh account mein real cash hai.

Ab $V (S)$ ko region by region evaluate karo — yeh step kyun? Kyunki har $max$ sirf apne region mein "on" hota hai, toh piecewise structure naturally saamne aata hai.

Region A — stock middle mein rehti hai ( $K_{2} \leq S \leq K_{3}$ ): Chaaon $max$ terms 0 hain → $V = 0$ → Profit $= C$ . Yeh max profit zone hai, aur yeh flat hai. Kyun? Har option worthless expire hota hai; tum poora credit rakhte ho.

Region B — bada drop ( $S \leq K_{1}$ ): Short put deta hai $- (K_{2} - S)$ , long put deta hai $+ (K_{1} - S)$ . Sum $= K_{1} - K_{2}$ (ek constant negative). Profit $= (K_{1} - K_{2}) + C$ . Kyun constant? $K_{1}$ ke neeche dono puts dollar-for-dollar move karte hain aur apne changes cancel kar dete hain, ek fixed loss chhod ke = spread width minus credit.

Region C — bada rise ( $S \geq K_{4}$ ): Symmetry se, Profit $= (K_{3} - K_{4}) + C = - (K_{4} - K_{3}) + C$ .

KYUN sirf ek side lose hoti hai: stock ek hi expiry pe $K_{1}$ ke neeche aur $K_{4}$ ke upar finish nahi ho sakti, toh tum dono spreads pe kabhi assigned nahi hoge.

Worked Examples

Common Mistakes

Forecast-then-Verify

Recall Answer padhne se pehle forecast karo

Stock $50 pe. Sell 45 put / Buy 42 put / Sell 55 call / Buy 58 call. Credit $1.00. Predict karo: max profit? max loss? break-evens? Phir check karo.

Answer: wings $= 3$ each. Max profit $=\$ 1 $. M a x l oss$ = 3-1 = $2 $. B r e ak - e v e n s$ = 45-1=44 $a u r$ 55+1=56 $. Profit agar \$ 44 aur $56 ke beech close ho.

Flashcards

Iron condor mein kaun se chaar legs hote hain?

OTM put sell karo, aur-OTM put buy karo, OTM call sell karo, aur-OTM call buy karo — sab same expiry.

Iron condor debit trade hai ya credit?

Credit — tum net premium upfront receive karte ho.

Iron condor kaun sa market view express karta hai?

Neutral / range-bound; profit hota hai agar stock short strikes ke beech rahe.

Iron condor ka max profit?

Net credit received,

C

Iron condor ka max loss (equal wings width

w

w - C

Max loss dono wings ka sum kyun nahi hota?

Ek expiry pe sirf ek side breach ho sakti hai; tum dono short strikes ke paas ek saath nahi ho sakte.

Break-even formulas?

K_{2} - C

(lower) aur

K_{3} + C

(upper).

Rising implied volatility iron condor ko help karta hai ya hurt?

Hurt karta hai — yeh short-volatility position hai.

Iron condor mein kaun sa Greek dost hai?

Theta (time decay) tumhare favour mein kaam karta hai.

Unequal wings mein, kaun si width max loss set karti hai?

Wider wing,

max (w_{p}, w_{c}) - C

Example 1 mein (90/95/105/110, credit 1.50) max loss kya hai?

5 - 1.50 = \

3.50$ per share.

Recall Feynman: ek 12-saal ke bacche ko samjhao

Socho tum apne dost se bet karte ho ki kal ka temperature "kahin normal rahega" — na freezing, na boiling. Tum do aur doston se thode paise lete ho: ek jo bet karta hai bahut thanda hoga, ek jo bet karta hai bahut garam hoga. Agar kal bas normal din ho, dono haarte hain aur tum unke paise rakhte ho. Lekin safe rehne ke liye, tum chhoti side-bets karte ho taaki agar bahut thanda ya bahut garam BHI ho, tum sirf thoda hi lose karo, sab kuch nahi. Iron condor bilkul yahi hai: tum jeette ho jab stock boring ho, aur teri losses dono extreme sides pe capped hain.

Connections

Short Strangle — same neutral view lekin undefined risk; condor loss cap karne ke liye long wings add karta hai.
Bull Put Spread — condor ka lower half.
Bear Call Spread — condor ka upper half.
Iron Butterfly — same idea lekin short strikes SAME price pe (zyada credit, narrower zone).
Theta Decay — woh engine jo time ke saath tera paisa kamaata hai.
Implied Volatility — woh risk jisme tum short ho.
Options Break-even Analysis — credit break-evens ko baahir kaise shift karta hai.