Iron Condor

Market-neutral defined-risk premium sale. Outlook: neutral. Direction: credit. Risk: defined.

An iron condor combines a short OTM put spread below the current price with a short OTM call spread above. You collect premium from both short options, and the long wings cap your risk at the spread width. The trade profits when the underlying stays between the two short strikes.

Iron condors are the canonical defined-risk market-neutral premium-selling structure. They work best in high-IV-rank environments where the collected premium is meaningful relative to the spread width, and where the implied move priced into the options is expected to overstate the realized move.

Break-Even

Two break-evens: short put strike − net credit (lower) and short call strike + net credit (upper).

Max Profit

Net credit × 100 × contracts, achieved if spot finishes between the two short strikes at expiration.

Max Loss

(Spread width − net credit) × 100 × contracts, achieved if spot is at or beyond either long strike at expiration.

When to Use

• IV rank > 50 — premium is elevated and the risk/reward is meaningful.
• You expect range-bound price action through expiration.
• Earnings and major catalysts are NOT within the expiration window.
• You want a defined-risk structure (unlike naked short strangles).

Common Pitfalls

• Max loss is larger than max profit — the risk/reward is asymmetric. Consistent edge requires win rate > 50%.
• One-sided moves through a short strike create rapid gamma losses near expiration.
• Management: many traders close at 25–50% of max profit to avoid the expiration-week gamma risk.
• Pin risk: the underlying closing exactly at a short strike creates assignment uncertainty.

Try This on a Live Ticker

The strategy builder applies any structure to a live ticker with real Greeks and expiration P/L: SPY · QQQ · AAPL · NVDA · TSLA.