DEFINITION of 'Modidor'

An options strategy that consists of buying and selling out-of-the-money calls and puts and is designed to lock in investor returns above or below a designated trading price. The modidor is a modified version of the iron condor, but differs in that there is just one breakeven price. It resembles a broken-winged butterfly when charted.

BREAKING DOWN 'Modidor'

Whereas an iron condor is best used in a volatile environment in the hope that a security will trade within a discernible range, the modidor allows for profits regardless of an issue's volatility. With a modidor, the underlying stock must simply move above (in a bullish scenario) or below (in a bearish scenario) a specific breakeven price.

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