Iron Condor Strategy
The iron condor is a market-neutral options strategy that profits when a stock stays within a defined price range. By selling an out-of-the-money put spread and call spread, you collect premium and profit from time decay (theta) as long as the stock stays between your short strikes.
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How It Works
- 1
Identify stocks with high implied volatility rank (IV rank > 50%) and upcoming time decay
- 2
Sell an out-of-the-money put spread (bull put) at ~15-20 delta
- 3
Sell an out-of-the-money call spread (bear call) at ~15-20 delta
- 4
Select 30-45 days to expiration (DTE) for optimal theta decay
- 5
Manage at 50% of max profit or adjust if a wing is threatened
Best For
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Frequently Asked Questions
What is an iron condor?
An iron condor is an options strategy consisting of four options: a bull put spread (sell put, buy lower put) and a bear call spread (sell call, buy higher call). You profit when the stock stays between the short strikes.
What is the maximum loss on an iron condor?
Maximum loss is the width of the wider spread minus the net credit received. This occurs if the stock moves beyond either wing at expiration.
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Past performance does not guarantee future results. Trading involves substantial risk of loss, including the possibility of losing more than your initial investment. You are solely responsible for your own trading decisions.
Hypothetical or backtested performance results have inherent limitations. Unlike actual trading records, simulated results do not represent real trading and may not account for the impact of market liquidity, slippage, or all transaction costs. No representation is made that any account will or is likely to achieve profits or losses similar to those shown.