Strategies
Iron Condor
An iron condor sells an out-of-the-money put spread and an out-of-the-money call spread on the same expiration for a net credit. Maximum profit is the credit if the underlying expires between the short strikes; maximum loss is the wider spread width minus the credit.
The condor is a short strangle with protective wings. Buying the outer options caps risk and reduces margin at the cost of some premium. Typical construction places short strikes near the expected move (about 16–30 delta) with 30–45 days to expiration, balancing theta against gamma risk.
Iron condors profit from time decay and falling IV in range-bound markets. They lose when the underlying trends through a short strike; management usually means closing at 50% of maximum profit, rolling the untested side for more credit, or closing the tested spread before it nears maximum loss.
Formula
Max profit = net credit · Max loss = wing width − net credit · Break-evens = short put − credit and short call + credit
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Frequently asked questions
What is a good delta for iron condor short strikes?
Roughly 16–30 delta per side. Lower delta gives a higher probability of profit with less credit; higher delta collects more but is tested more often.