Uneven-wing modidor as one limit package

A condor with unequal wings

A modidor is assembled as a four-leg condor whose call-strike gap is allowed to differ from the put-strike gap. The construction combines condor wings with modified-butterfly spacing. In the iron-condor framing used here, a short call sits above the underlying and a short put sits below it, each paired with a further out-of-the-money long option. The package benefits if price stays between the short strikes, and the long options cap the loss.

A standard condor keeps the call-wing width equal to the put-wing width. A modified-butterfly is defined by unequal strike spacing. The directional-bias is the payoff tilt created when the call-wing strike width differs from the put-wing strike width. Read as an option-spread, the package specifies entry, exit, and abstention together rather than as separate single-option bets.

The July SMH package

With SMH at 97.93, the July example bought ten 104 calls and ten 86 puts and sold ten 103 calls and ten 93 puts. Both short options were five points out of the money, while the long call was six points out and the long put was twelve points out, producing an upside tilt and greater downside exposure.

The stated expiration payoff for that package was positive if SMH finished at or above a 91.26 breakeven, with 6.67 of room below the 97.93 spot print before that level. A further variation increased the long 104-call count from ten to twelve in order to add upside participation.

One limit-order for four legs

Because four options must be filled together, the procedure specified active option volume, tight option bid-ask spreads, and one limit-order covering the entire package in order to limit slippage. The limit-order specifies an acceptable net price and submits all four legs as one package so slippage does not break the intended structure.

Negative-vega and a reaction plan

The structure was described as typically negative-vega, so a later rise in implied volatility would reduce the open mark and a later fall would improve it. Entry was therefore preferred after implied volatility had already increased.

A reaction plan was required before entry. The package was not treated as unmanaged, because a fast decline can consume the 6.67 cushion and enlarge open losses.