What is Iron Condor?
A four-leg neutral strategy that profits when a stock stays within a range.
📖 Complete Definition
An iron condor combines a bull put spread and bear call spread on the same underlying with the same expiration. It profits when the stock stays between the two short strikes. Maximum profit is the net credit received. It's popular for income generation in range-bound markets and benefits from time decay and IV contraction.
Examples
- →Sell 90/95 put spread and 105/110 call spread for $1.50 credit
- →Max profit: $150 if stock stays between $95 and $105 at expiration
❓ Frequently Asked Questions
When should I use an iron condor?
Iron condors work best when you expect low volatility and range-bound price action. They're ideal when IV is high (expensive options) and you expect it to contract.
What's the max loss on an iron condor?
Max loss is the width of the wider spread minus the credit received. For equal-width spreads: spread width minus credit received, times 100.
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