Iron Condor

An iron condor is a defined-risk, defined-reward options strategy, which means you can know your worst-case loss and best-case gain before you ever place the trade. The catch is that a lot of traders calculate it wrong. Specifically, they average the two spread widths instead of using the wider one. That single mistake can lead to a position that’s carrying far more risk than the trader thinks. This guide walks through the correct formulas and a full worked example. ...

An options profit calculator turns a handful of numbers from your trade ticket (strikes, premium, contracts) into the three things every options trader actually needs before placing a trade: max profit, max loss, and breakeven. The options profit calculator on this site does this for single-leg trades like long calls and puts, income strategies like covered calls and cash-secured puts, and multi-leg trades like credit spreads, debit spreads, and iron condors. ...

Iron condors and iron butterflies are both defined-risk, range-bound options strategies built from four legs: a put spread and a call spread combined into one position. The skeleton is the same. What’s different is where you put the short strikes, and that one choice explains almost everything about how each trade behaves. The Shared Structure Both strategies are built the same way: Sell a put, buy a further OTM put (a credit put spread) Sell a call, buy a further OTM call (a credit call spread) Combined, these four legs create a position that profits if the underlying stays within a defined range through expiration, with losses capped on both sides no matter how far the stock moves. For a full breakdown of the individual legs and payoff mechanics, see Iron Condor 101 and Iron Butterfly 101. ...

Plenty of stocks spend weeks going nowhere, bouncing between the same high and low. An iron condor is a way to get paid for that. You sell a call spread above the price and a put spread below it, collect premium on both, and keep it all if the stock stays in between. How it’s built Four options on the same stock, all with the same expiration: Sell an out-of-the-money call above the current price. Buy a call further out to cap your risk if the stock rallies. Sell an out-of-the-money put below the current price. Buy a put further out to cap your risk if the stock drops. That’s a bear call spread and a bull put spread combined. You receive a net credit when you open it, and as long as the stock finishes between the two short strikes, all four options expire worthless and the credit is yours. ...