I finally took a little bite and entered an order for a couple of contracts on a condor. This is my first condor so I just want to get my feet wet without getting nervous.
The details (all July): long put @ 5, short put @ 6, short call @ 15, long call @ 16. Net credit if filled .60 (between bid/ask).
Max profit 60 between 6 and 15; max loss 40 below 5 or above 16; breakevens at 5.40 and 15.60. It appears to be a fairly conservative position.
Two questions I have:
First, how do I figure profit? I'm guessing something like the difference between the short strike exposures (900) divided by the profit or loss, so that if I made the max profit of 60, the profit would be 60/900 or 7%? Somehow that doesn't seem correct. It would intuitively seem to me to be 100%, but if that were the case, how would I figure a $30 profit, or a $20 loss?
Second, what surprises should I be watching for (other than the obvious possible major price swing)?
Lou
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