An iron condor is a four-leg, market-neutral strategy that profits when the underlying stays inside a range into expiry. It combines a bear call spread above the market and a bull put spread below it — you collect premium from both, and your risk is capped on each side.
The structure
- Sell an OTM call, buy a further-OTM call (bear call spread — the upper wing)
- Sell an OTM put, buy a further-OTM put (bull put spread — the lower wing)
| Metric | Value |
|---|---|
| Max profit | Net premium collected (if price stays between the short strikes) |
| Max loss | (Wing width × lot) − net premium — capped on each side |
| Breakevens | Short call + net credit · Short put − net credit |
When to use it
- You expect a range-bound or quiet market into expiry
- IV is elevated — richer premium to collect, and you want it to fall (short vega)
- You want defined risk on both sides, not a naked short
The catch: condors win often but small, and lose rarely but larger if price breaks a wing. Manage early, size small, and respect the defined max loss.
Build and stress-test an iron condor in House of Trading — see both wings, the profit zone, breakevens and defined-risk margin before you place it on your own broker.