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neutral strategies
Iron Condors
Analyzing the risk profile of iron condors
Skewing Strikes
Having four legs certainly adds to the complexity and variations of this strategy. Next, let's take a look at what happens if the wings are different sizes.
Wider Puts
By selling a larger put spread than call spread, we increase the risk to the downside in exchange for a larger credit. This results in a more position.
If the credit we receive is larger than the width of one of our wings, we can actually eliminate the risk entirely on that side. In the scenario above, we have a $1.03 total credit, and a $1-wide call spread. Since the intrinsic value of the call spread cannot be greater than $1, that would leave a $0.03 net profit anywhere above the long call. The max profit potential can be achieved anywhere between the two short strikes, and the break-even is located $1.03 below our short put strike.
Wider Calls
The same relationships also work in reverse. If we'd rather sell a more spread, we can decrease the width of our put vertical instead:
Notice how these last two risk profiles are simply the mirror image of the first two. This shows how skewing strikes can be a powerful way to establish a with an iron condor.