Strategy reference
Iron Condor
An iron condor is a four-leg position that profits when the stock stays inside a defined range. You collect a credit by selling a put spread below the stock and a call spread above it.
Structure
Four legs at four different strikes, all expiring on the same date: buy a put at the lowest strike, sell a put at the next strike up, sell a call at the next strike up, and buy a call at the highest strike. Equivalent to selling a put spread and a call spread at the same time. You collect a net credit up front.
Payoff at expiration
At expiration, you make your maximum profit — the credit you collected — any time the stock finishes between the two middle strikes. Your worst case on each side equals the width of that side's spread minus your credit, which happens if the stock finishes outside the outermost strikes. Two breakevens: the lower middle strike minus your credit, and the upper middle strike plus your credit.
- Stock price
- $100
- Buy
- 1 × $90 put @ $0.50
- Sell
- 1 × $95 put @ $1.50
- Sell
- 1 × $105 call @ $1.50
- Buy
- 1 × $110 call @ $0.50
- Net credit
- $2.00
- Max gain
- $2.00 at any $95 ≤ S ≤ $105
- Max loss
- $3.00 at S ≤ $90 or S ≥ $110
- Breakevens
- $93.00 and $107.00
Frequently asked questions
What is an iron condor?
An iron condor is a four-leg credit strategy combining a short put spread and a short call spread, both expiring on the same date. It profits when the stock stays inside a defined range.
What is the maximum profit on an iron condor?
The maximum profit is the net credit collected. You realize it at any expiration price between the two middle strikes.
What is the maximum loss on an iron condor?
The maximum loss equals the width of one of the wing spreads minus the credit collected. It occurs at any expiration price outside the outer strikes.
This page is an educational reference, not investment advice. Numbers in the worked example are approximations for illustration only — real option prices depend on volatility, interest rates, dividends, and time to expiration. See the full disclaimer for details.