Bear Condor Strategy: Options trading provides traders with various strategies to capitalize on different market conditions, from bullish to bearish and even in a range-bound period.

This article explores one of the most common bearish-biased options strategy, the Bear Condor strategy. We shall expand the knowledge of the option strategy by understanding the working structure with an example.

What is a Bear Condor?

The bear condor strategy is a low-risk, high-reward four-legged options trading strategy designed to be used when a bearish market trend is predicted.

The Strategy involves 4 legs of Put Options. Here two legs of Put Options are being bought and two legs are being sold. The strategy involves selling two out-of-the-money (OTM) put options and buying two out-of-the-money (OTM) put options in an underlying security with the same expiration date.

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This strategy is performed when the underlying asset is expected to fall and then consolidate in a specific price range upon expiration to make potentially large profits with lower risk. Basically, this strategy can also be referred to as an iron condor with a bearish bias. 

Working model

To deploy the bear condor strategy first we need to construct the four legs of the options required.

The four legs are:-

  • First leg:- Buy one out of the money(OTM) put option. (The strike price is calculated as a price 1% below the spot price of the security and rounded up or below to get the nearest strike price. The distance of the strike price from the spot price is based on the expected volatility.)
  • Second leg:- Sell one out of the money(OTM) put option. (Three/Four strikes below leg 1)
  • Third leg:- Sell one deep out-of-the-money (OTM) put option. (Three/Four strikes below leg 2)
  • Fourth leg:- Buy one deep out of the money(OTM) put option.(Three/Four strikes below leg 3)


Let us understand the above construction clearly with an example.

Assume Nifty 50  is trading around a spot price of 19435. We believe that the market will have a strong downtrend followed by consolidation in a range and expire between 18850 to 19050 level of which we are not sure.

As we are not sure about the exact expiration levels but have a strong overview of the downtrend we deploy the strategy bear condor.

The four legs for the assumed spot price of nifty 50, 19435 follow as below:-

  1. Buy the 19250 put option with a premium paid of RS. 90.35. 

The strike price is calculated as 1% of 19435(spot) which is 194.35. 19435–194.35=19240.65. Here, 19240.65 is rounded off to 19250 which is the nearest strike price which is the first buy strike price.

  1. Sell 19050 put option which accounts for a premium received of Rs. 54.35. It is 4 strikes below 19250.
  2. Sell the 18850 put option which accounts for a received premium of Rs. 35. It is 4 strikes below 19050.
  3. Buy the 18650 put option with a premium paid of Rs. 21. It is 4 strikes below 18850.

Here we sell one 19050 put option and one 18850 put option, to minimise the risk of the trade.

To protect the 19050 put option we buy a 19250 put option and to protect the 18850 put option we buy the 18650 put option.

Here net premium is calculated as the difference between premium paid to premium received. In this example net premium accounts to RS. 22.

 I.e. premium paid – premium received.

     {(90.35+21=111.35) – (54.35+35=89.35)} = 22

The overall margin required to deploy this strategy for 1 lot of NIfty 50 with similar premiums considered in the example will approximate 40000 Rs. As we are protecting the sell options with the buy, we get margin reductions which is beneficial.

Max Prof and Max loss

  • The maximum profit from the bear condor strategy is calculated as the difference between the strike and net premium.

From the same example discussed above the difference between the strikes is 200(19050–18850) and the net premium is 22 so the maximum profit is 200–22=178. Hence for one lot of nifty, it will be 178 X 50(1 lot = 50 quant)=8900 Rs.

  • The maximum loss at expiry incurred will be the net premium, that is from the example 22 X 50(1 Lot=50) = 1100 Rs.

Breakeven points

The strategy consists of two breakeven points:-

  • Upper break-even point = Higher Buy option strike price – net premium.

I.e 19250–22= 19232. If the spot price moves above this point the loss starts to incur.

  • Lower break-even point = Lower Buy option strike price + net premium.

I.e 18650+22= 18672. If the spot price moves below this point the loss starts to incur.

Payoff chart

Bear Condor Strategy Chart

From the payoff chart, it can be understood that:-

  • The maximum profit at expiry ranges between two Sell-put option contracts. I.e. If nifty expires between 18850 and 19050.
  • If the nifty expires below 18650(Buy PE) or above 19250(Buy PE) then the strategy incurs maximum loss.

When to deploy the strategy

Timing is crucial when applying the bear condor strategy. It’s most effective when you expect the market to break key support levels or any bad news that leads to a strong bearish momentum in the market followed by a sideways movement.


  • Profitable in a bearish market followed by a range-bound level at expiry.
  • Limited loss.
  • Hedging helps to reduce the margin requirements.
  • Option legs can be adjusted based on traders’ views on market moments for higher profitable ratios.


  • In the bear condor strategy, the profits are limited.
  • Loss can occur easily if the market doesn’t move as per the view of the trader.

In Closing

Having understood the bear condor strategy, it can be concluded that the strategy has a lot of scope and application in bearish biased market sentiment.

As it caps the loss with high reward comparatively one can get the benefit of the strategy to set up profitable trades.

With a better understanding of the option strategies, one can improvise the setups for good risk-reward ratios with better risk management.

Written by Deepak M

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