Iron Condor Options Strategy Guide
By OptionClaws, VirWare LLC · Published 2026-08-26 · Updated 2026-09-16
An iron condor combines a bull put spread below the stock and a bear call spread above it, all in the same expiration, for a net credit. You keep the whole credit if the stock finishes between the two short strikes, and the long wings cap the loss if it breaks out either side. It is the defined-risk way to sell both sides of the market at once, and the classic trade for a range-bound stock with elevated implied volatility. Only one side can be in the money at expiration, so the margin held is the wider wing, not both.
Key takeaways
- A bull put spread plus a bear call spread in the same expiration, both out of the money
- Max profit is the total credit; max loss is the wider wing width minus the credit
- Two breakevens: short put minus credit, and short call plus credit
- Wins when the stock stays inside the short strikes until expiration
When it makes sense
- You expect the stock to stay inside a range through expiration
- Implied volatility rank is high, so both spreads are paying well
- You want defined risk on both sides rather than a naked strangle
- There is no earnings report or binary event inside the window
Quick reference
| Construction | A bull put spread below the share price plus a bear call spread above it, all four legs in one expiration, one contract each, for a net credit. |
|---|---|
| Max profit | Total net credit times 100 per condor, kept if the stock closes between the two short strikes at expiration. |
| Max loss | (Wider wing width minus total net credit) times 100 per condor, taken on one side only, if the stock closes beyond either long strike. |
| Breakeven | Short put strike minus total credit on the downside; short call strike plus total credit on the upside, per share. |
Assumptions
- Wing width is the distance between a short strike and its long strike, in dollars per share. When the wings differ, max loss uses the wider one.
- Total net credit is the sum of the two spreads' credits at fill. The scanner uses the mid on each leg, or the bid on short legs and the ask on long legs under conservative pricing.
- Per-condor dollar figures use the standard 100-share multiplier.
- Commissions on four legs, assignment and exercise fees, early assignment, and adjustments before expiration are excluded.
How it works
Sell an out-of-the-money put and buy a further out-of-the-money put (the put spread), and sell an out-of-the-money call and buy a further out-of-the-money call (the call spread), all in one expiration. The two credits combine into one. At expiration, if the stock is between the short put and the short call all four options expire worthless and you keep the credit. If it is beyond a long strike, that spread is worth its full width and you lose width minus credit. Lower breakeven is the short put minus the credit; upper breakeven is the short call plus the credit. Many condor sellers place the short strikes somewhere near 15 to 25 delta on each side. How many expected moves away that is depends on the expiration and implied volatility, which is why the scanner measures the distance in ATRs rather than assuming it.
Risk and reward
Maximum profit: the net credit. Maximum loss: the wider wing width minus the credit, times 100. Breakevens: short put minus credit and short call plus credit. Return on risk for condors with $5 wings and short strikes in that delta range often lands between 20 and 50%, though it varies with width and volatility. The probability of keeping the full credit is often approximated as 1 minus the sum of the two short deltas; that is a rule of thumb, and the scanner's probability of expiring worthless is a direct model estimate instead. Unlike a single credit spread, a condor loses on a big move in either direction, so the width of the profit zone relative to the stock's typical move is what matters most.
Greeks and volatility
Delta is near zero at entry and drifts against you as the stock approaches either short strike. Theta is positive and is the whole point: every quiet day collects premium from both sides. Vega is negative, so a volatility collapse after entry is a gain and a spike is a paper loss, even if the stock has not moved. Gamma is negative and accelerates in the last week, which is why most condor sellers close well before expiration.
Managing the trade
A common convention is to close at 50% of the credit, or when either short strike is tested (stock reaches it). A tested side can be rolled out in time, or the untested side can be rolled closer to the stock to collect more credit and narrow the zone. Early assignment risk lives in the short call ahead of an ex-dividend date and, rarely, in a deep-in-the-money short put; either leaves you with a stock position still hedged by the long wing. Never let a condor settle with the stock between a short and long strike on one side: pin risk can leave you assigned on the short leg with the long leg expiring worthless.
Worked example
Stock at $200. Sell the 35-day $190 put and buy the $185 put; sell the $210 call and buy the $215 call. Total credit $1.60 ($160). Both wings are $5 wide, so maximum loss is ($5.00 minus $1.60) times 100 = $340, and return on risk is $160 / $340 = 47%. Breakevens are $188.40 and $211.60. If the stock finishes anywhere from $190 to $210 you keep $160. At $213 the call spread is worth $3.00 and you lose $140. At or beyond $185 or $215 you lose the full $340.
What to screen for
Screen iron condors on probability of profit, return on risk, and breakeven distance measured in expected moves (ATRs), so the profit zone is sized to how the stock actually moves rather than to a round percentage. Filter for high implied volatility rank, exclude earnings inside the window, cap the maximum loss per spread to size positions, and require liquidity on all four legs.
Scan the market for iron condors
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Frequently asked questions
- What is the maximum loss on an iron condor?
- The wider wing width minus the total credit, times 100. With $5 wings and a $1.60 credit the most you can lose is $340 per condor, on one side only.
- What are the breakevens on an iron condor?
- Short put strike minus the credit on the downside, short call strike plus the credit on the upside. A 190/210 condor sold for $1.60 breaks even at $188.40 and $211.60.
- Can I lose on both sides of an iron condor?
- Not at expiration: the stock can only be above the call spread or below the put spread, not both. Margin is held on one wing for that reason. Before expiration, adjusting a tested side and then having the stock reverse can cost on both sides.
- Iron condor or short strangle?
- A short strangle collects more credit and has no long wings, so its loss is unlimited and its margin is much larger. The condor gives up some credit for a hard maximum loss and a small, fixed margin.
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Sources
- Bull Put Spread (Credit Put Spread) · Options Industry Council
- Bear Call Spread (Credit Call Spread) · Options Industry Council
- Characteristics and Risks of Standardized Options · The Options Clearing Corporation
- Options · FINRA
Last updated 2026-09-16. Educational content, not investment advice. Options involve substantial risk and are not suitable for every investor. See our Terms of Service.