Analyze butterfly condor and iron condor structures

Identifier: C4T6L2 | Revision: 2026-10-26 | Planned study: 10–15 minutes, excluding extended practice.

Decision and objectives

Choose whether the method addresses this lesson’s task before placing an order. Objectives: 1. Identify the signed legs behind a structure name. 2. Calculate central and tail expiry outcomes. 3. Account for multiple-leg implementation costs.

Prerequisite: C4T6L1.

All numbers, quotes, contract terms and dates in the case are hypothetical teaching assumptions, not a listed series or offer. Unless varied below, options are European, expire together in 90 calendar days, are cash settled in TRY, and use 100 underlying units per contract. Premiums are TRY per underlying unit, paid at entry; signed quantities identify long (+) and short (−) legs. Assume no distributions and zero financing for the isolated payoff, no holiday adjustment, and final cash on the next business day. Actual tax is excluded, not assumed zero.

Mechanics

A long call butterfly uses one lower call, two short middle calls and one upper call at evenly spaced strikes. A long call condor splits the middle strikes and creates a flatter central payoff. An income iron condor combines a bull put credit spread and a bear call credit spread. Terminology differs across providers, so the signed legs and cash flow definition govern. These structures have bounded matched expiry payoffs, but require more orders and more attention to quantities, deliverables and exercise behavior.

Price and return drivers

Calculate each option payoff and sum it; only then subtract debit or add credit. The butterfly’s maximum occurs at its middle strike; the call condor’s plateau lies between its middle strikes. The income iron condor gains most when both short options expire without value and loses a spread width less credit in either distant tail. Do not add both tail maxima when the same nonnegative underlying cannot simultaneously end in both tails; do stress separate failures and unmatched assignments.

Worked case

Synthetic multiplier100, matched European cash settlement. Butterfly: +1 call90@12,−2 calls100@6,+1 call110@2; debit200, total costs60. Call condor: +1 call80@22,−1 call90@13,−1 call110@3,+1 call120@1; debit700,costs60. Income iron condor: +1 put80@1,−1 put90@3,−1 call110@3,+1 call120@1; credit400,costs80.

Maximum gains are740,240,320; maximum losses260,760,680 respectively. These are net economic expiry bounds, not current account margin requirements.

Adverse case

Before expiry supplied package bids3.50 for butterfly and8 for call condor imply net90 and40. An iron-condor close ask6 gives400−600−80=−280. The terminal central gain therefore does not establish a profitable interim exit. If the middle butterfly quantity is−3 rather than−2, one extra uncovered call destroys the upper-tail bound. Physical or American-style variations can create stock, borrowing and strike-funding obligations while long wings remain open.

Practical use

Confirm all four quantities, width and adjustment factors. Multiple commissions and thin wings can make a visually attractive center payoff impractical.

For any actual domestic implementation, verify the exact issue/contract, authorized intermediary, account permission and executable size. Include spread, commissions, passed-through fees, funding/borrow, custody and exercise/exit costs without double-counting embedded charges. Recheck income year, residency/status, issue/acquisition dates and effective tax law; all case results remain before actual tax.

Decision boundaries

Use a central-range structure only when its price, width and retained risk fit the objective; a narrow maximum-gain point is difficult to realize precisely. A low headline debit can be dominated by four-leg costs. Decline if the wings cannot be executed or if transaction costs erase the benefit. Do not call every condor a short-volatility position without checking its direction and current sensitivities; Greeks can change sign across price and time.

Practice and references

Exercise: butterfly +1 call50,−2 calls60,+1 call70, multiplier100; net debit300 and fees50. Solution: At expiryS60 gross payoff1000, net650. AtS40 orS80 payoff0, net−350. The cost-adjusted breakevens are53.50 and66.50. A quote between them before expiry does not guarantee that the package can be sold at the terminal formula.

Takeaway: Butterfly, condor and iron-condor labels require explicit signed legs; multiple-leg costs and mismatches can dominate. Reference links: product card, formula; glossary: Butterfly; Condor; Iron condor. Next: C4T6L3. Topic test.

Sources: Borsa Istanbul: Options (retrieved 2026-10-26; General information and basic concepts). Borsa Istanbul: Settlement Method (retrieved 2026-10-26; Settlement by contract family). Options Industry Council: All Strategies (retrieved 2026-10-26; Strategy descriptions). GIB: Provisional Article67 Guide for Individuals (retrieved 2026-10-26; Sections1,3–9 and19; publication introduction). Revision 2026-10-26; recheck changing terms before publication.

Shared reference guide