Iron Condor
An Iron Condor combines a bear call spread and a bull put spread on the same expiry, profiting if the underlying stays within a defined range.
At a glance
Strategy Snapshot
Market View
Neutral — expecting range-bound action with falling IV.
Net Cost
Net credit (premium received).
Legs
Sell OTM Call + Buy further OTM Call, Sell OTM Put + Buy further OTM Put
Max Profit
Net credit received.
Max Loss
Wing width − Net credit received.
Breakeven
Two breakevens: lower put strike − net credit and upper call strike + net credit.
Build
Strategy Construction
Color-coded legs — emerald for long positions, rose for short positions. Strikes shown around reference spot 100.
- SELLLeg 1
1 × 95 PE
Premium 2.00
- BUYLeg 2
1 × 90 PE
Premium 1.00
- SELLLeg 3
1 × 105 CE
Premium 2.00
- BUYLeg 4
1 × 110 CE
Premium 1.00
Visualize
Payoff at Expiry
Conceptual payoff with reference spot = 100. Strikes and premiums shown are illustrative.
Sensitivity
Greeks Exposure
Net portfolio Greek exposure for a typical setup. Bars show directional sensitivity from −1 (short) to +1 (long).
Delta
Directional exposure to underlying price.
0.00
Neutral
Gamma
Sensitivity of Delta to price changes.
-0.50
Strong Short
Theta
Time decay exposure (per day).
+0.70
Strong Long
Vega
Sensitivity to implied volatility shifts.
-0.60
Strong Short
Strengths
Advantages
Why traders use it
- Profits in sideways, low-volatility markets.
- Defined max risk on both wings.
- Theta-positive — benefits from time decay.
Trade-offs
Risks & Disadvantages
What can go wrong
- Limited reward vs the wing risk on either side.
- Vulnerable to sharp directional moves or vol spikes.
- Adjustments can be complex and costly.
Avoid
Common Mistakes
Watch out for
- Selling too close to spot, raising assignment risk.
- Ignoring gamma risk in the final week.
- Not pre-defining adjustment rules on breach.
AI Insight
LiveIron Condors perform efficiently during low directional volatility conditions, particularly when IV rank > 40 and realized vol is decelerating. Close at 25–50% of max profit to avoid late gamma risk.
Generated by NextQuantLabs AI — for educational guidance only.
Questions
Frequently Asked
When should I exit a profitable Iron Condor?+
Many traders close at 25-50% of max profit to avoid late-cycle gamma risk.
How wide should the wings be?+
Wider wings improve max profit but increase risk — typically 1.5-2x the body width is common.