An iron condor profits when a stock stays within a range. You collect premium from both sides — calls above the stock and puts below — and keep it if the stock doesn't move too far in either direction by expiration.
An iron condor combines two vertical spreads: a bull put spread below the stock price and a bear call spread above it. You sell a put and buy a lower put, and simultaneously sell a call and buy a higher call — four legs total. The net result is a position that profits as long as the stock stays between your two short strikes at expiration.
You receive a credit when entering. That credit is your maximum profit. If the stock stays within your range, all four options expire worthless and you keep everything you collected.
Example: A stock is at $100. You sell the $90 put, buy the $85 put, sell the $110 call, and buy the $115 call — all expiring in 30 days. You collect $2.00 in premium ($200 total). The stock needs to stay between $90 and $110 at expiration for you to keep the full credit. If it closes at $95, all four legs expire worthless — profit: $200. If it drops to $87, your put spread is tested and the position moves toward its maximum loss.
Maximum profit: The net credit received. In the example, $200. This is achieved when the stock closes between the two short strikes at expiration.
Maximum loss: Spread width minus credit received, times 100. In the example: ($5 spread − $2 credit) × 100 = $300. This occurs if the stock moves beyond either outer strike.
Breakeven points: Two of them. Lower: short put strike minus credit ($90 − $2 = $88). Upper: short call strike plus credit ($110 + $2 = $112).
You expect the stock to stay in a range. Iron condors work best in low-volatility environments with no major catalysts expected — the stock needs to go nowhere for you to win.
Implied volatility is elevated. Selling the condor during high IV means collecting more premium and having a wider range to work with. If IV then drops after entry, the position profits from the volatility collapse as well.
You want a defined-risk income trade. Maximum loss is known before entering. No surprises, no unlimited risk.
A major catalyst is coming. Earnings, FDA decisions, and economic releases can blow through your strikes overnight. An iron condor before earnings is a high-risk bet that the move will be smaller than the market expects.
The stock is in a strong trend. Condors need range-bound movement. A stock that's been trending steadily in one direction is likely to keep going — right through your short strike.
How wide should the spreads be?
Wider spreads collect more premium and give more room to be wrong, but also cost more if the trade goes against you. $5 spreads are common for stocks under $100. $10–$25 spreads work better for higher-priced stocks and ETFs like SPY.
How do I manage an iron condor if the stock moves toward my strike?
Most traders close or roll the threatened side when the short strike is breached or when losses reach 2× the premium received. Holding to expiration with a losing condor rarely ends well.
Is an iron condor better than selling a straddle?
An iron condor has defined maximum loss. A short straddle has theoretically unlimited risk on the call side. The iron condor gives up some premium in exchange for that protection — usually the right trade-off for most retail traders.
Can I build an iron condor in OpCalc?
Yes. Use the main calculator, click a put below the current price to sell, click a lower put to buy, then click a call above the price to sell, and a higher call to buy. The P/L chart updates in real time as you add each leg.