1
00:00:00,100 --> 00:00:02,638
The index falls further.

2
00:00:02,638 --> 00:00:05,550
Why does this loss stop growing?

3
00:00:05,550 --> 00:00:09,625
A bought option is paying against the sold option.

4
00:00:09,625 --> 00:00:12,812
Mira paid money for that protection.

5
00:00:12,812 --> 00:00:16,425
So she keeps less of the opening premium.

6
00:00:16,425 --> 00:00:20,988
Today, we build an iron condor and iron fly.

7
00:00:20,988 --> 00:00:25,538
These index option prices are made up for learning.

8
00:00:25,538 --> 00:00:29,413
We use sixty five units on every leg.

9
00:00:29,413 --> 00:00:33,675
That is our example quantity, not a current rule.

10
00:00:33,675 --> 00:00:38,625
All results here are before charges and execution costs.

11
00:00:38,625 --> 00:00:43,296
The expiry limits need every matched leg kept intact.

12
00:00:43,996 --> 00:00:48,321
Start with the sold twenty four thousand six hundred put.

13
00:00:48,321 --> 00:00:51,508
It brings seventy rupees per unit.

14
00:00:51,508 --> 00:00:55,509
Add the sold twenty five thousand four hundred call.

15
00:00:55,509 --> 00:00:58,671
It brings sixty rupees per unit.

16
00:00:58,671 --> 00:01:02,296
Now buy the twenty four thousand four hundred put.

17
00:01:02,296 --> 00:01:05,371
Pay thirty rupees per unit for it.

18
00:01:05,371 --> 00:01:08,996
Buy the twenty five thousand six hundred call too.

19
00:01:08,996 --> 00:01:12,271
That costs twenty rupees per unit.

20
00:01:12,271 --> 00:01:16,434
Eighty rupees per unit remain as the total credit.

21
00:01:16,434 --> 00:01:19,834
These two bought options are called wings.

22
00:01:19,834 --> 00:01:23,520
Each wing is two hundred points from its short.

23
00:01:24,220 --> 00:01:29,808
At expiry, suppose settlement is twenty four thousand three hundred.

24
00:01:29,808 --> 00:01:34,145
The sold put requires three hundred rupees per unit.

25
00:01:34,145 --> 00:01:38,157
The bought put pays one hundred rupees per unit.

26
00:01:38,157 --> 00:01:42,520
Three hundred minus one hundred leaves two hundred owed.

27
00:01:42,520 --> 00:01:46,045
Our eighty rupee credit covers part of that.

28
00:01:46,045 --> 00:01:50,495
The remaining loss is one hundred twenty rupees per unit.

29
00:01:50,495 --> 00:01:54,670
Now settlement falls further, to twenty four thousand.

30
00:01:54,670 --> 00:01:58,720
The short put now requires six hundred rupees.

31
00:01:58,720 --> 00:02:01,432
The bought put pays four hundred.

32
00:02:01,432 --> 00:02:05,408
The difference is still two hundred rupees per unit.

33
00:02:05,408 --> 00:02:09,070
After our credit, the same loss remains.

34
00:02:09,070 --> 00:02:13,416
The wing creates that flat line, not a stop order.

35
00:02:14,116 --> 00:02:19,466
For sixty five units, that loss is seven thousand eight hundred.

36
00:02:19,466 --> 00:02:24,328
Between the two sold strikes, no expiry payment is needed.

37
00:02:24,328 --> 00:02:28,578
The eighty rupee credit becomes profit before costs.

38
00:02:28,578 --> 00:02:33,266
That is five thousand two hundred rupees across our units.

39
00:02:33,266 --> 00:02:38,603
The lower expiry breakeven is twenty four thousand five hundred twenty.

40
00:02:38,603 --> 00:02:42,966
The upper one is twenty five thousand four hundred eighty.

41
00:02:42,966 --> 00:02:45,879
Why not add two full wing losses?

42
00:02:45,879 --> 00:02:50,591
One final settlement cannot be beyond both opposite wings.

43
00:02:50,591 --> 00:02:55,878
For unequal widths, use the larger width minus total credit.

44
00:02:55,878 --> 00:03:01,054
That rule needs a standard, ordered condor with matching legs.

45
00:03:01,054 --> 00:03:06,048
Separate exits can still lose on both sides over time.

46
00:03:06,748 --> 00:03:11,560
An iron fly starts with both shorts at one strike.

47
00:03:11,560 --> 00:03:15,785
Sell the twenty five thousand put for one hundred fifty.

48
00:03:15,785 --> 00:03:19,898
Sell the call there for another one hundred fifty.

49
00:03:19,898 --> 00:03:23,985
Buy the twenty four thousand eight hundred put for sixty.

50
00:03:23,985 --> 00:03:28,086
Buy the twenty five thousand two hundred call for sixty.

51
00:03:28,086 --> 00:03:32,048
That leaves one hundred eighty rupees per unit.

52
00:03:32,048 --> 00:03:35,960
Again, each wing is two hundred points wide.

53
00:03:35,960 --> 00:03:41,123
The full profit needs settlement exactly at twenty five thousand.

54
00:03:41,123 --> 00:03:46,286
Across sixty five units, that is eleven thousand seven hundred.

55
00:03:46,286 --> 00:03:51,923
These invented prices do not show an available trading opportunity.

56
00:03:51,923 --> 00:03:56,424
A large maximum profit says nothing about its chance.

57
00:03:57,124 --> 00:04:02,174
Suppose the fly settles at twenty five thousand one hundred fifty.

58
00:04:02,174 --> 00:04:06,911
The short call requires one hundred fifty rupees per unit.

59
00:04:06,911 --> 00:04:10,624
Only thirty of our one hundred eighty remain.

60
00:04:10,624 --> 00:04:15,361
At twenty five thousand two hundred fifty, the wing pays too.

61
00:04:15,361 --> 00:04:18,749
The short call requires two hundred fifty.

62
00:04:18,749 --> 00:04:22,962
The bought call pays fifty, leaving two hundred owed.

63
00:04:22,962 --> 00:04:27,299
After the credit, we lose twenty rupees per unit.

64
00:04:27,299 --> 00:04:32,249
The maximum expiry loss is one thousand three hundred rupees.

65
00:04:32,249 --> 00:04:36,912
The lower breakeven is twenty four thousand eight hundred twenty.

66
00:04:36,912 --> 00:04:41,249
The upper one is twenty five thousand one hundred eighty.

67
00:04:41,249 --> 00:04:44,074
The condor has a flat top.

68
00:04:44,074 --> 00:04:46,440
The fly has one peak.

69
00:04:47,140 --> 00:04:51,590
Protection needs the same index and the same expiry.

70
00:04:51,590 --> 00:04:53,902
Quantities must match.

71
00:04:53,902 --> 00:04:57,590
One bought lot cannot cover two sold lots.

72
00:04:57,590 --> 00:05:00,753
Buy the lower put and the higher call.

73
00:05:00,753 --> 00:05:04,765
Remove a wing, and that protection disappears.

74
00:05:04,765 --> 00:05:10,127
For separate entry orders, buy and confirm protection first.

75
00:05:10,127 --> 00:05:15,153
When exiting, close the shorts before removing their protection.

76
00:05:15,153 --> 00:05:19,527
A basket button does not promise simultaneous fills.

77
00:05:19,527 --> 00:05:24,578
Before expiry, use the whole position’s actual closing cost.

78
00:05:24,578 --> 00:05:29,828
Closing our eighty credit condor for forty five leaves thirty five.

79
00:05:29,828 --> 00:05:34,803
That is two thousand two hundred seventy five rupees before costs.

80
00:05:34,803 --> 00:05:40,416
Closing for one hundred forty instead loses three thousand nine hundred.

81
00:05:41,116 --> 00:05:46,966
First, bought wings reduce credit, but limit matched expiry payments.

82
00:05:46,966 --> 00:05:51,778
Second, the condor’s flat top differs from the fly’s peak.

83
00:05:51,778 --> 00:05:56,966
Third, exact contracts and actual fills create the protection.

84
00:05:56,966 --> 00:06:02,078
Keep every required leg intact for the stated expiry limits.

85
00:06:02,078 --> 00:06:05,804
Charges and execution costs are extra.

86
00:06:05,804 --> 00:06:08,116
Losses remain possible.

87
00:06:08,116 --> 00:06:12,629
Mira records the whole position in her practice notebook.

88
00:06:12,629 --> 00:06:17,491
Next, we build simpler two-option credit and debit spreads.

89
00:06:17,491 --> 00:06:20,808
What changes when we pay money to enter?