Iron Condor Strategy
Make money when the market just sits there and does nothing.
What is the Iron Condor Options Strategy?
Imagine you bet that the temperature will stay between 18°C and 28°C. If it does, you win. If it goes too hot or too cold, you lose a fixed amount. That is exactly what an Iron Condor does — but with stock prices.
You collect money upfront. If the stock stays inside your range, you keep the money. If it moves too far, you lose — but only up to a fixed amount you already know.
Why is it Called "Iron Condor"?
The profit/loss chart shape — a flat profit zone in the middle with two sloping "wings" on either side — looks like a condor's wingspan. "Iron" because it uses both calls and puts.
How Does the Iron Condor Trade Work?
- 1 Step 1 — Pick a stock/index that you think will NOT move much.
- 2 Step 2 — Set an upper limit and a lower limit.
- 3 Step 3 — Sell a call and a put at your limits. Buy protection further out. All same expiry.
- 4 Step 4 — Collect net credit upfront.
- 5 Step 5 — If price stays inside your zone at expiry, keep everything collected.
Types of Iron Condor Strategies
Short Iron Condor (Most Common)
SELL the inner options, BUY the outer ones. Collect credit. Profit if stock stays in zone.
When to Use the Iron Condor Strategy?
- Calm markets
- No big news coming
- When options are expensive
- When you want steady income with a known worst-case
Profit and Loss of the Iron Condor
Before looking at the chart, here is a plain-English summary of what you can make and what you can lose.
The total premium collected upfront.
The width of one spread minus the premium collected.
Lower: put sell strike − credit. Upper: call sell strike + credit.
Iron Condor Payoff Diagram
The chart below shows how profit/loss changes with the underlying price at expiry. Green zone = profit, red zone = loss.
Iron Condor Example Trade
| Action | Type | Strike | Premium |
|---|---|---|---|
| Sell | Call | ₹22,500 | +₹80 |
| Buy | Call | ₹22,800 | -₹30 |
| Sell | Put | ₹21,500 | +₹75 |
| Buy | Put | ₹21,200 | -₹28 |
NIFTY closed at ₹21,800. All four options expired worthless. Kept ₹97.
Pros & Cons of the Iron Condor
- Maximum loss is always fixed
- Wins in calm markets (60–70% win rate)
- Every day adds profit
- Works on any index or large-cap
- Profit is capped
- One big move can wipe out many small wins
- Four legs = four fees
- Needs attention if price drifts toward limits
Iron Condor Frequently Asked Questions
Quick Quiz
Answer all questions and check your score.
1 An Iron Condor has how many legs?
2 Iron Condor profits when:
3 Maximum profit on an Iron Condor is:
4 Maximum loss on an Iron Condor is:
5 Iron Condor is best used in: