Modidor

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.

RELATED TERMS
  1. Condor Spread

    Similar to a butterfly spread, a condor is an options strategy ...
  2. Iron Condor

    An advanced options strategy that involves buying and holding ...
  3. Breakeven Point - BEP

    1. In general, the point at which gains equal losses. 2. In options, ...
  4. Breakeven Price

    1. The amount of money for which an asset must be sold to cover ...
  5. Leg

    A leg is one component of a derivatives trading strategy, in ...
  6. Combination

    The act of combining two or more financial instruments or businesses. ...
Related Articles
  1. Trading

    Options Trading: The Modidor Spread

    Use this modification of an iron condor to reduce risk and increase your chance at profiting on the trade.
  2. Trading

    The Iron Condor

    This market-neutral strategy isn't for everyone. Read on to find out if it is for you.
  3. Trading

    Find Profits By Hedging Iron Condors

    Hedging iron condors with put calendars can help control losses, and can even make an investor more profitable.
  4. Trading

    Options Trading With The Iron Condor

    This options strategy allows your profits to soar in a sideways market.
  5. Trading

    Iron Condors Fly On Fragile Wings

    Do the rewards outweigh the risks for this trading strategy? Read on to find out.
  6. Trading

    Iron Condors: Wing It To Maximum Profit

    Understanding the right way to execute an iron condor can increase potential returns and limit risk.
  7. Trading

    Get Familiar with These 6 Option Strategies

    When you’re ready to move beyond the basics of investing, it’s time to learn your options.
  8. Trading

    What is an Iron Butterfly Option Strategy?

    This relatively simple strategy is designed to provide a profit for investors who believe that there will be minimal price movement in the underlying security until expiration.
  9. Managing Wealth

    Strategies for Trading Volatility With Options (NFLX)

    These five strategies are used by traders to capitalize on stocks or securities that exhibit high volatility.
  10. Trading

    Explaining Credit Spread

    A credit spread has two different meanings, one referring to bonds, the other to options.
RELATED FAQS
  1. Why should I consider buying an option if it's out-of-the-money?

    Learn when a trader may want to buy out-of-the-money options either for hedging purposes or to profit if the underlying stock ... Read Answer >>
  2. When does one sell a put option, and when does one sell a call option?

    The incorporation of options into all types of investment strategies has quickly grown in popularity among individual investors. ... Read Answer >>
  3. Should I buy options that are in the money or out of the money?

    Choosing which specific option to buy can often be a complicated process, and there are literally hundreds of optionable ... Read Answer >>
  4. What does break-even analysis tell a business about its shutdown point?

    Learn what a break-even analysis tells a company about its shutdown point, and understand why a company's break-even point ... Read Answer >>
  5. Do options make more sense during bull or bear markets?

    Understand how options may be used in both bullish and bearish markets, and learn the basics of options pricing and certain ... Read Answer >>
  6. How do I determine the breakeven point for a short put?

    Learn how to determine the breakeven point for a short put. Shorting puts is appropriate for sophisticated traders who understand ... Read Answer >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center