Strategy lesson · Advanced · neutral
Iron Condor Explained
Four-leg short premium: put credit spread + call credit spread. Profits if price stays between short strikes; defined risk via long wings.
How a Iron Condor is built
Buy lower put, sell higher put, sell lower call, buy higher call (all same expiry in the classic IC).
- Leg 1: buy put · strike template 90 · premium ~1 · 1 contract(s)
- Leg 2: sell put · strike template 95 · premium ~2.2 · 1 contract(s)
- Leg 3: sell call · strike template 105 · premium ~2.2 · 1 contract(s)
- Leg 4: buy call · strike template 110 · premium ~1 · 1 contract(s)
Risk & reward snapshot
| Market bias | neutral |
|---|---|
| Max profit | Net credit received. |
| Max loss | Width of tested wing − credit (per side structure). |
| Breakeven | Short put − credit and short call + credit (approx for standard IC). |
Figures are conceptual for the classic structure. Your actual premiums, strikes, and fees change the numbers — confirm on the calculator.
When traders use it
- Range-bound outlook; elevated IV you expect to stabilize or crush gently.
- You want defined risk versus a short strangle.
Key risks
- Strong trends can hit max loss on one side.
- Managing winners/losers and early assignment near expiration.
Practical tips
- Symmetric vs skewed wings change directional lean — model both.
- Track POP as a rough guide, not a promise.
Practice on the calculator
- Open the Iron Condor calculator.
- Load a symbol and option chain; fill realistic mid premiums.
- Review max profit, max loss, breakevens, and the date × price heatmap.
- Change strikes and DTE to see how risk shape shifts.
FAQ
What is an Iron Condor?
Four-leg short premium: put credit spread + call credit spread. Profits if price stays between short strikes; defined risk via long wings.
What is the max loss on an Iron Condor?
Width of tested wing − credit (per side structure).
When should I use an Iron Condor?
Range-bound outlook; elevated IV you expect to stabilize or crush gently. You want defined risk versus a short strangle.