Iron Condor
An iron condor sells an out-of-the-money put spread and an out-of-the-money call spread — a defined-risk, range-bound income strategy that profits when the underlying stays between the short strikes.
- Max profit
- 400
- Max loss
- -600
- Breakeven(s)
- 86.0, 114.0
When to use
Use when you expect low volatility and a range-bound underlying through expiry, and you want to collect premium with fully capped risk. Popular in high-IV environments where premium is rich.
Risk profile
Risk is limited to the wider spread width minus the net credit. Maximum profit is the net credit received, kept in full if price stays between the two short strikes at expiration.
FAQ
How does an iron condor make money?
You collect a net credit up front. If the underlying stays between the two short strikes through expiration, all four options expire worthless and you keep the entire credit.
What is the maximum loss on an iron condor?
The maximum loss is the width of one spread minus the net credit received. It occurs if the underlying moves beyond either long-strike wing. Only one spread can reach maximum loss at a time.
Why use an iron condor instead of a short strangle?
The long wings of an iron condor cap your risk, turning the theoretically unlimited loss of a naked short strangle into a defined, margin-efficient maximum loss — which also lowers broker margin requirements.