5 Common Myths about Mutual Fund Investments

5 Common Myths about Mutual Fund Investments
by Priyanka Sharma 17/04/2017

Over the years, investing in Mutual Funds has emerged as a popular option among a vast population of investors with varied incomes and risk appetites. Like any other investment, putting money into Mutual Funds too requires a careful assessment, and study on your part even if you have a professional help. Listed below are some misconceptions related to MF investments:

Mutual Funds demand long-term, huge investments

The fact is that you can get started with a low amount of capital investment’ it could be as low as Rs 1,000. Another misconception is that all Mutual Funds investments are long-term investments and that it is a long wait before one draws benefits from it. The latter too is incorrect. Mutual Funds can be either short term or long term investments, depending upon the underlying assets the mutual funds invest in.

Mutual Fund investment is risk-free

Perhaps, one of the biggest misconceptions about Mutual Funds is that it is a risk-free investment. This is simply not correct. According to one school of thought, the risk of investing in MF is inversely proportion to the diversification of the portfolio. Taking this argument forward, if you hold 2 stocks in your portfolio then the risk is high compared to an investor with 20 stocks. Similarly, MF investments in multiple stocks are less risky compared to direct equity investment.

Also, it is generally advisable that the investment theme should be different to hedge the risk. It doesn’t make sense to invest in 3-4 large cap mutual fund schemes, as these are likely to invest in more or less the same stocks.

Mutual Funds with lower NAV will deliver higher returns

Another common myth related to Mutual Fund investment is that MFs with lower NAV will deliver higher returns. As an investor, we are led to believe that Mutual Fund scheme with NAV of Rs 1,000 will deliver lower returns compared to fund with NAV of Rs 100. The argument behind this is that it is more probable for a stock to climb from Rs 10 to Rs 12 i.e. 20% return compared to the jump from Rs 4,000 to Rs 4,800 for same 20% return. However, the fact is that the underlying theme of Mutual Fund investment decides the future returns irrespective of lower or higher NAV.

All Mutual Funds qualify for tax deduction

This is often sold as one of the biggest USPs for investing in Mutual Funds. However, the fact is that while MF investments do provide tax savings benefits, only the Equity Linked Savings Scheme (ELSS) is eligible for tax deduction under Section 80C of Income Tax Act. The dividends and long term capital gains from these investments are tax free.

Mutual Fund investment does not require regular monitoring

It is generally understood that Mutual Fund investments do not require any regular monitoring. In general, investors take it easy after putting their money in MFs. Well, it is true that MFs do not largely require a constant vigil, but you cannot afford to neglect it completely as it is your investment after all. This is largely because top performing Mutual fund schemes keep changing every year. Therefore, to maximize your returns, it’s a good idea to check the performance of your funds every year. You should keep modifying your portfolio depending on the performance of the funds in previous years. Some of the funds are conservative or invest in defensive stocks, which deliver consistent returns. Such schemes may not be top performers, but are but consistent performers and are best suited for the conservative investor. Such funds are also apt for SIP investment.

Top 5 Mutual Funds

 

Scheme Name

Corpus (Rs cr)

1 M (%)

6 M (%)

1 Y (%)

3 Y (%)

5 Y (%)

HDFC Prudence Fund(G)

17,776

3.1

10.6

30.8

19.7

16.5

SBI BlueChip Fund-Reg(G)

11,629

2.9

4.5

21.5

20.4

19.7

IIFL India Growth Fund-Reg(G)

345

1.0

5.1

33.0

0.0

0.0

Franklin India Smaller Cos Fund(G)

4,860

4.0

8.6

35.6

32.9

30.5

ICICI Pru Infrastructure Fund(G)

1,435

3.0

13.4

34.3

17.7

13.6

 

Next Article

Long Call Calendar Spread

Long Call Calendar Spread
by Nilesh Jain 17/04/2017

A Long Call Calendar Spread is initiated by selling one call option and simultaneously buying a second call option of the same strike price of underlying assets with a different expiry. It is also known as Time Spread or Horizontal Spread. The purpose of this strategy is to gain from Theta with limited risk, as the Time Decay of the near period expiry will be faster as compared to the far period expiry. As the near period option expires, far month call option would still have some premium in it, so the option trader can either own the far period call or square off both the positions at same time on near period expiry.

When to initiate a Long Call Calendar Spread?

A Long Call Calendar Spread can be initiated when you are very confident that the security will remain neutral or bearish in near period and bullish in longer period expiry. This strategy can also be used by advanced traders to make quick returns when the near period implied volatility goes abnormally high as compared to the far period expiry and is expected to cool down. After buying a Long Calendar Spread, the idea is to wait for the implied volatility of near period expiry to drop. Inversely, this strategy can lead to losses in case the implied volatility of near period expiry contract rises even if the stock price remains at same level.

How to construct a Long Call Calendar Spread?

A Long Call Calendar Spread is implemented by selling near month at-the-money/out-the-money call option and simultaneously buying far month at-the-money/out-the-money call option of the same underlying assets.

Strategy

Buy far month ATM/OTM call and sell near month ATM/OTM call.

Market Outlook

Neutral to positive movement.

Motive

Hopes to reduce the cost of buying far month call option.

Risk

Limited to the difference between the premiums.

Reward

Limited if both the positions squared off at near period expiry. Unlimited if far period call option hold till next expiry.

Margin required

Yes

Let’s try to understand with an example:

Nifty Current spot price

9000

Sell near month ATM call strike price Rs.

9000

Premium received (per share) Rs.

180

Buy far month ATM call strike price Rs.

9000

Premium paid (per share) Rs.

250

Lot size (in units)

75

Suppose Nifty is trading at 8800. An investor, Mr. A is expecting no significant movement in near month contract, so he enters a Long Call Calendar Spread by selling near month strike price of 9000 call at Rs.180 and bought 9000 call for Rs.250. The net upfront premium paid to initiate this trade is Rs.70, which is also the maximum possible loss. The idea is to wait for near month call option to expire worthless by squaring off both the positions in near month expiry contract or reduce the cost of far month buy call by setting off the profit made from the near month call option. Another way by which this strategy can be profitable is when the implied volatility of the near month falls.

For the ease of understanding, we did not take into account commission charges. Following is the payoff chart of the expiry.

The Payoff Schedule on near period expiry date:

Near period expiry if NIFTY closes at

Net Payoff from near period Call sold (Rs.)

Theoretical Payoff from far period call Buy (Rs.)

Net Payoff at near period expiry (Rs.)

8700

180

-190

-10

8800

180

-160

20

8900

180

-120

60

9000

180

-70

110

9100

80

-10

70

9200

-20

+60

40

9300

-120

140

20

9400

-220

230

10

9500

-320

330

10

Following is the payoff schedule till far expiry, where maximum loss would be limited up to 320 Rs (250+70), Rs 70 is from near expiry and Rs 250 is the premium of far month call bought. Maximum profit would be unlimited since far month call bought will have unlimited upside potential.

Net Combined Payoff Schedule on next period expiry date:

NIFTY closing price on Near and Far period expiry

Theoretical Payoff from far period call Buy (Rs.)

Net Payoff at near period expiry (Rs.)

Net Payoff at Far period expiry (Rs.)

8700

-250

-10

-260

8800

-250

20

-230

8900

-250

60

-190

9000

-250

110

-140

9100

-150

70

-80

9200

-50

40

-10

9300

50

20

70

9400

150

10

160

9500

250

10

260

The Payoff Graph

Impact of option Greeks:

Delta: The net Delta of a Long Call Calendar will be close to zero or marginally positive. The negative Delta of the near month short call option will be offset by positive Delta of the far month long call option.

Vega: A Long Call Calendar has a positive Vega. Therefore, one should buy spreads when the volatility of far period expiry contract is expected to rise.

Theta: With the passage of time, if other factors remain same, Theta will have a positive impact on the Long Call Calendar Spread in near period contract, because option premium will erode as the near period expiration dates draws nearer.

Gamma: Gamma estimates how much the Delta of a position changes as the stock prices changes. The near month option has a higher Gamma. Gamma of the Long Call Calendar Spread position will be negative till near period expiry, as we are short on near period options and any major upside movement till near period expiry will affect the profitability of the spreads.

How to manage risk?

A Long Call Calendar spread is exposed to limited risk up to the difference between the premiums, so carrying overnight position is advisable but one can keep stop loss on the underlying assets to further limit losses.

Analysis of Long Call Calendar Spread strategy

A Long Call Calendar Spread is the combination of short call and long call option with different expiry. It mainly profits from Theta i.e. Time Decay factor of near period expiry, if the price of the security remains relatively stable in near period. Once the near period option has expired, the strategy becomes simply long call, whose profit potential is unlimited.

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Sovereign Gold Bonds Guide - Basics you need to know before Investing | 5paisa Article

Sovereign Gold Bonds Guide - Basics you need to know before Investing | 5paisa Article
by Priyanka Sharma 17/04/2017

Sovereign Gold Bonds are the new-age way of investing in gold. It presents an opportunity to invest in the precious metal that is not in the form of jewelry, coins or a bar, overcoming the hassles of physical safekeeping or theft, the expenses of a locker, and getting rid of impurities in gold. At same time, it ensures better returns as compared to physical gold, besides providing interest on the amount invested.

The Gold Monetization scheme was launched by Prime Minister Narendra Modi in November 2015. It sought to bring out some 20,000 tonnes of gold from households and temples, and merge into the mainstream banking system.

In general, buying paper gold will help the government in controlling gold import, and Sovereign Gold Bonds is just a start. According to one estimate, only 3060 kg of gold have been collected from five tranches so far.

The government regularly announces tranches of Sovereign Gold Bond (SGB) Scheme, the details of which are posted on the RBI website. In its latest offering, applications for the bond issue were accepted February 27- March 3, 2017, while the bonds were issued on March 17, 2017. The scheme enjoys immense government attention as Shaktikanta Das, Secretary, Economic Affairs Department, tweeted on the latest launch, "excellent opportunity to invest and benefit from gold price appreciation".

There is little doubt that Sovereign Gold Bonds can be helpful in diversifying one’s portfolio. By investing in SGB, one can open two simultaneous streams of revenue. One from the movement of gold prices and another from fixed interest rate.

And so before you take the plunge and get involved in Sovereign Gold Bonds, here are a few pointers to keep in mind:

Alternative exposure to gold

Don't put all your eggs in one basket. It is always good to diversify your portfolio with around 10-15% invested in gold.

Sovereign Gold Bonds offer a solid alternative to take exposure to gold as it offers additional interest. There are no annual recurring expenses as compared with gold ETFs (expense ratio in ETF is 1%). The sovereign gold bonds will be sold through banks, Stock Holding Corporation of India (SHCIL), designated post offices and the National Stock Exchange of India and the Bombay Stock Exchange, which would allow early exit.

Can be used as collateral

Bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to ordinary gold loan mandated by the Reserve Bank of India (RBI) from time to time.

Who can buy the Bonds

The bonds are restricted for sale to resident Indian entities, including individuals, HUFs, trusts, universities and charitable institutions. Bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram.

Interest rate

Investors will be compensated at a fixed rate of 2.5% per annum payable semi-annually on the nominal value.

Tenure

The tenure of the bond will be for a period of eight years. However, an exit option is available from the fifth year.

How the SGBs have fared so far

Scheme

Issue period

Issue price (Rs/gm)

Sovereign Gold Bond 2015-16

Nov 5 – Nov 20, 2015

2648

SGB 2016

Jan 18 – Jan 22, 2016

2600

SGB 2016 – Series II

March 8- March 14, 2016

2916

SGB 2016 - 17 Series I

July 18 – July 22, 2016

3119

SGB 2016 - 17 Series II

Sep 1 – Sep 9, 2016

3150

SGB 2016 – 17 Series III

Oct 24 – Nov 2, 2016

2957

SGB 2016 – 17 Series IV

Feb 27 – March 3, 2017

2893

Prices as on Feb 23, 2017

Source: RBI

Next Article

Long Call Condor Options Trading Strategy

Long Call Condor Options Trading Strategy
by Nilesh Jain 17/04/2017

Long Call Condor options trading strategy

A Long Call Condor is similar to a Long Butterfly strategy, wherein the only exception is that the difference of two middle strikes sold has separate strikes. The maximum profit from condor strategy may be low as compared to other trading strategies; however, a condor strategy has high probability of making money because of wider profit range.

When to initiate a Long Call Condor

A Long Call Condor spread should be initiated when you expect the underlying assets to trade in a narrow range as this strategy benefits from time decay factor.

How to construct a Long Call Condor?

A Long Call Condor can be created by buying 1 lower ITM call, selling 1 lower middle ITM call, selling 1 higher middle OTM call and buying 1 higher OTM calls of the same underlying security with the same expiry. The ITM and OTM call strikes should be equidistant.

Strategy

Buy 1 ITM Call, Sell 1 ITM Call, Sell 1 OTM Call and Buy 1 OTM Call

Market Outlook

Neutral on market direction and Bearish on volatility

Motive

Anticipating minimal price movement in the underlying assets

Upper Breakeven

Higher Strike price - Net Premium Paid

Lower Breakeven

Lower Strike price + Net Premium Paid

Risk

Limited to Net premium paid

Reward

Limited (Maximum profit is achieved when underlying expires between sold strikes)

Margin required

Yes

Let’s try to understand with an example:

Nifty Current spot price

9100

Buy 1 deep ITM call of strike price (Rs)

8900

Premium paid (Rs)

240

Sell 1 ITM call of strike price (Rs)

9000

Premium received (Rs)

150

Sell 1 OTM call of strike price (Rs)

9200

Premium received (Rs)

40

Buy 1 deep OTM call of strike price (Rs)

9300

Premium paid (Rs)

10

Upper breakeven

9240

Lower breakeven

8960

Lot size

75

Net premium paid

60

Suppose Nifty is trading at 9100. An investor Mr. A estimates that Nifty will not rise or fall much by expiration, so he enters a Long Call Condor and buys 8900 call strike price at Rs 240, sells 9000 strike price of Rs 150, sells 9200 strike price for Rs 40 and buys 9300 call for Rs 10. The net premium paid to initiate this trade is Rs 60, which is also the maximum possible loss. This strategy is initiated with a neutral view on Nifty hence it will give the maximum profit only when there is little or no movement in the underlying security. Maximum profit from the above example would be Rs 3000 (40*75). The maximum profit would only occur when underlying assets expires in the range of strikes sold.

In the mentioned scenario, maximum loss would be limited up to Rs 4500 (60*75) and it will occur if the underlying assets goes below 8960 or above 9240 strikes at expiration. If the underlying assets expires at the lowest strike then all the options will expire worthless, and the debit paid to initiate the position would be lost. If the underlying assets expire at highest strike, all the options below the highest strike would be In-the-Money. Furthermore, the resulting profit and loss would offset and net premium paid would be lost.

For the ease of understanding of the payoff schedule, we did not take in to account commission charges. Following is the payoff schedule assuming different scenarios of expiry.

The Payoff Schedule:

On Expiry NIFTY closes at

Net Payoff from 1 Deep ITM Call bought (Rs) 8900

Net Payoff from 1 ITM Call sold (Rs) 9000

Net Payoff from 1

OTM Call sold (Rs)

9200

Net Payoff from 1 deep OTM call bought (Rs) 9300

Net Payoff (Rs)

8600

-240

150

40

-10

-60

8700

-240

150

40

-10

-60

8800

-240

150

40

-10

-60

8900

-240

150

40

-10

-60

8960

-180

150

40

-10

0

9000

-140

150

40

-10

40

9100

-40

50

40

-10

40

9200

60

-50

40

-10

40

9240

100

-90

0

-10

0

9300

160

-150

-60

-10

-60

9400

260

-250

-160

90

-60

9500

360

-350

-260

190

-60

9600

460

-450

-360

290

-60

The Payoff Graph:

Impact of Options Greeks before expiry:

Delta: If the underlying asset remains between the lowest and highest strike price the net Delta of a Long Call Condor spread remains close to zero.

Vega: Long Call Condor has a negative Vega. Therefore, one should initiate Long Call Condor spread when the volatility is high and expect to decline.

Theta: A Long Call Condor has a net positive Theta, which means strategy will benefit from the erosion of time value.

Gamma: The Gamma of a Long Call Condor strategy goes to lowest values if it stays between sold strikes, and goes higher if it moves away from middle strikes.

Analysis of Long Call Condor spread strategy

A Long Call Condor spread is best to use when you are confident that an underlying security will not move significantly and stays in a range of strikes sold. Long Call Condor has a wider sweet spot than the Long Call Butterfly. But there is a tradeoff; this is a limited reward to risk ratio strategy for advance traders.

Next Article

Long Iron Butterfly Options Strategy

Long Iron Butterfly Options Strategy
by Nilesh Jain 17/04/2017

A Long Iron Butterfly is implemented when an investor is expecting volatility in the underlying assets. This strategy is initiated to capture the movement outside the wings of options at expiration. It is a limited risk and a limited reward strategy. A Long Iron Butterfly could also be considered as a combination of bull call spread and bear put spread.

When to initiate a Long Iron Butterfly

A Long Iron Butterfly spread is best to use when you expect the underlying assets to move sharply higher or lower but you are uncertain about direction. Also, when the implied volatility of the underlying assets falls unexpectedly and you expect volatility to shoot up, then you can apply Long Iron Butterfly strategy.

How to construct a Long Iron Butterfly?

A Long Iron Butterfly can be created by buying 1 ATM call, Selling 1 OTM call, buying 1 ATM put and selling 1 OTM put of the same underlying security with the same expiry. Strike price can be customized as per the convenience of the trader; however, the upper and lower strike must be equidistant from the middle strike.

Strategy

Buy 1 ATM Call, Sell 1 OTM Call, Buy 1 ATM Put and Sell 1 OTM Put

Market Outlook

Movement above the highest or lowest strike

Motive

Profit from movement in either direction

Upper Breakeven

Long Option (Middle) Strike price + Net Premium Paid

Lower Breakeven

Long Option (Middle) Strike price - Net Premium Paid

Risk

Limited to Net Premium Paid

Reward

Higher strike-middle strike-net premium paid

Margin required

Yes

Let’s try to understand with an example:

Nifty Current spot price (Rs)

9200

Buy 1 ATM call of strike price (Rs)

9200

Premium paid (Rs)

70

Sell 1 OTM call of strike price (Rs)

9300

Premium received (Rs)

30

Buy 1 ATM put of strike price (Rs)

9200

Premium paid (Rs)

105

Sell 1 OTM put of strike price (Rs)

9100

Premium received (Rs)

65

Upper breakeven

9280

Lower breakeven

9120

Lot Size

75

Net Premium Paid (Rs)

80

Suppose Nifty is trading at 9200. An investor Mr A thinks that Nifty will move drastically in either direction, below lower strike or above higher strike by expiration. So he enters a Long Iron Butterfly by buying a 9200 call strike price at Rs 70, selling 9300 call for Rs 30 and simultaneously buying 9200 put for Rs 105, selling 9100 put for Rs 65. The net premium paid to initiate this trade is Rs 80, which is also the maximum possible loss.

This strategy is initiated with a view of movement in the underlying security outside the wings of higher and lower strike price in Nifty. Maximum profit from the above example would be Rs 1500 (20*75). Maximum loss will also be limited up to Rs 6000 (80*75).

For the ease of understanding of the payoff, we did not take in to account commission charges. Following is the payoff chart and payoff schedule assuming different scenarios of expiry.

The Payoff chart:

The Payoff Schedule:

 

On Expiry NIFTY closes at

Net Payoff from 1 ITM Call Bought (Rs) 9200

Net Payoff from 1 OTM Call Sold (Rs) 9300

Net Payoff from 1 ATM Put bought (Rs) 9200

Net Payoff from 1 OTM Put sold (Rs.) 9100

Net Payoff (Rs)

8800

-70

30

295

-235

20

8900

-70

30

195

-135

20

9000

-70

30

95

-35

20

9100

-70

30

-5

65

20

9120

-70

30

-25

65

0

9200

-70

30

-105

65

-80

9280

10

30

-105

65

0

9300

30

30

-105

65

20

9400

130

-70

-105

65

20

9500

230

-170

-105

65

20

9600

330

-270

-105

65

20

 

Impact of Options Greeks before expiry:

Delta: The net Delta of a Long Iron Butterfly spread remains close to zero if underlying assets remain at middle strike. Delta will move towards 1 if underlying expires above higher strike price and Delta will move towards -1 if underlying expires below the lower strike price.

Vega: Long Iron Butterfly has a positive Vega. Therefore, one should buy Long Iron Butterfly spread when the volatility is low and expect to rise.

Theta: With the passage of time, if other factors remain same, Theta will have a negative impact on the strategy.

Gamma: This strategy will have a long Gamma position, so the change in underline assets will have a positive impact on the strategy.

How to manage Risk?

A Long Iron Butterfly is exposed to limited risk but risk involved is higher than the net reward from the strategy, one can keep stop loss to further limit the losses.

Analysis of Long Iron Butterfly strategy:

A Long Iron Butterfly spread is best to use when you are confident that an underlying security will move significantly. Another way by which this strategy can give profit is when there is an increase in implied volatility. However, this strategy should be used by advanced traders as the risk to reward ratio is high.

Next Article

Short Call Condor Options Trading Strategy

Short Call Condor Options Trading Strategy
by Nilesh Jain 17/04/2017

A Short Call Condor is similar to Short Butterfly strategy. The only exception is that the difference of two middle strikes bought has different strikes.

When to initiate a Short call condor?

A Short Call Condor is implemented when the investor is expecting movement outside the range of the highest and lowest strike price of the underlying assets. Advance traders can also implement this strategy when the implied volatility of the underlying assets is low and you expect volatility to go up.

How to construct a Short Call Condor?

A Short Call Condor can be created by selling 1 lower ITM call, buying 1 lower middle ITM call, buying 1 higher middle OTM call and selling 1 higher OTM calls of the same underlying security with the same expiry. The ITM and OTM call strikes should be equidistant.

Strategy

Sell 1 ITM Call, Buy 1 ITM Call, Buy 1 OTM Call and Sell 1 OTM Call

Market Outlook

Significant volatility above higher and lower strikes

Motive

Anticipating price movement in the underlying assets

Upper Breakeven

Highest strike price - Net credit

Lower Breakeven

Lowest strike price + Net credit

Risk

Limited (if expires above lower breakeven point and vice versa)

Reward

Limited to Net premium received

Margin required

Yes

Let’s try to understand with an example:

Nifty Current spot price

9100

Sell 1 ITM call of strike price (Rs)

8900

Premium received (Rs)

240

Buy 1 ITM call of strike price (Rs)

9000

Premium paid (Rs)

150

Buy 1 OTM call of strike price (Rs)

9200

Premium paid (Rs)

40

Sell 1 OTM call of strike price (Rs)

9300

Premium received (Rs)

10

Upper breakeven

9240

Lower breakeven

8960

Lot Size

75

Net premium received

60

Suppose Nifty is trading at 9100. An investor Mr. A estimates that Nifty will move significantly by expiration, so he enters a Short Call Condor and sells 8900 call strike price at Rs 240, buys 9000 strike price of Rs 150, buys 9200 strike price for Rs 40 and sells 9300 call for Rs 10. The net premium received to initiate this trade is Rs 60, which is also the maximum possible reward. This strategy is initiated with a view of significant volatility on Nifty hence it will give the maximum profit only when there is movement in the underlying security below 8900 or above 9200. Maximum profit from the above example would be Rs 4500 (60*75). The maximum profit would only occur when underlying assets expires outside the range of upper and lower breakevens. Maximum loss would also be limited to Rs 3000 (40*75), if it stays in the range of higher and lower breakeven.

For the ease of understanding of the payoff schedule, we did not take in to account commission charges. Following is the payoff schedule assuming different scenarios of expiry.

The Payoff Schedule:

On Expiry NIFTY closes at

Net Payoff from 1 Deep ITM Call Sold (Rs) 8900

Net Payoff from 1 ITM Calls Bought (Rs) 9000

Net Payoff from 1

OTM Call bought (Rs) 9200

Net Payoff from 1 deep OTM Call sold (Rs.) 9300

Net Payoff (Rs)

8600

240

-150

-40

10

60

8700

240

-150

-40

10

60

8800

240

-150

-40

10

60

8900

240

-150

-40

10

60

8960

180

-150

-40

10

0

9000

140

-150

-40

10

-40

9100

40

-50

-40

10

-40

9200

-60

-50

-40

10

-40

9240

-100

90

0

10

0

9300

-160

150

60

10

60

9400

-260

250

160

-90

60

9500

-360

350

260

-190

60

9600

-460

450

360

-290

60

The Payoff Graph:

Impact of Options Greeks before expiry:

Delta: If the underlying asset remains between the lowest and highest strike price the net Delta of a Short Call Condor spread remains close to zero.

Vega: Short Call Condor has a positive Vega. Therefore, one should buy Short Call Condor spread when the volatility is low and expect to rise.

Theta: Theta will have a negative impact on the strategy, because option premium will erode as the expiration dates draws nearer.

Gamma: The Gamma of a Short Call Condor strategy goes to lowest if it moves above the highest or below the lowest strike.

Analysis of Short Call Condor spread strategy

A Short Call Condor spread is best to use when you are confident that an underlying security will move outside the range of lowest and highest strikes. Unlike straddle and strangles strategies risk involved in short call condor is limited.