The Iron Condor is built for sideways markets. It collects Premium by selling two bounds (upper and lower) and profits as long as the asset stays between them at expiration.
Structure of an Iron Condor
- Sell an OTM Put (lower bound)
- Buy a further OTM Put (lower protection)
- Sell an OTM Call (upper bound)
- Buy a further OTM Call (upper protection)
| SPY | $510.00 |
| Sell a 490 Put / buy a 480 Put | $+0.90 net |
| Sell a 530 Call / buy a 540 Call | $+0.90 net |
| Net Premium Flow collected | $1.80 = $180 |
| Max profit zone | 490 → 530 at expiration |
| Max loss | (10 − 1.80) × 100 = $820 |
* This is a hypothetical illustration and does not reflect actual results. Results vary with market conditions and execution timing.
| SPY price | Result | P&L |
|---|---|---|
| Below 480 | Max loss (Put side) | $−820 |
| 488.20 → 531.80 | Full profit zone | $+180 |
| Above 540 | Max loss (Call side) | $−820 |
* This is a hypothetical illustration and does not reflect actual results. Results vary with market conditions and execution timing.
When an Iron Condor works well
- The market is in a sideways range with no strong trend.
- IV rank is high (above 50%) · fatter Premium.
- Earnings have already been announced.
- A clear technical structure with support and resistance.
