Combines two diagonal spreads — one with puts and one with calls. Creates a range-bound strategy that profits from time decay. Like an iron condor but using different expirations for better risk management.
Variable — dependent on time decay and IV dynamics
Net premium paid plus adjustment costs
Multiple breakeven points
Long 1 far-dated OTM Put + Short 1 near-dated OTM Put + Long 1 far-dated OTM Call + Short 1 near-dated OTM Call
Variable limited profit. Limited risk. Profits from time decay and range-bound movement.
When you expect the stock to trade in a range over the near term. When you want to benefit from time decay with some protection from the longer-dated options. Complex but versatile strategy.