What is an Iron Condor?
Updated 24 October 2026 · by Theo Chen
An Iron Condor is a market-neutral, defined-risk options trade: you sell an out-of-the-money Put Spread below the price and an out-of-the-money Call Spread above it, collecting two credits. You keep the full credit if the stock finishes between your two short strikes at expiration — a bet that the price stays in a range, not that it moves.
Want to see the numbers for a specific condor? Plug in your strikes and credits and the calculator returns the net credit, max profit, max loss, both breakevens and the profit zone.
Open the Iron Condor Calculator →How is an Iron Condor built?
An Iron Condor combines two vertical credit spreads on the same stock and expiration — one below the price, one above:
- Sell a Put below the current price (your short Put) and buy a further-out Put below that (your long Put). This is the Bull Put Spread — the lower wing.
- Sell a Call above the current price (your short Call) and buy a further-out Call above that (your long Call). This is the Bear Call Spread — the upper wing.
The two short options define the range you want the stock to stay inside; the two long options are the protection that caps your risk and makes the position defined-risk. You receive a net credit for opening the trade, and that credit is the most you can make.
The payoff: max profit, max loss and breakevens
- Max profit = the net credit collected, kept in full if the stock expires between the short Put and short Call strikes.
- Max loss = the width of one spread minus the net credit. Only one side can be breached at expiration, so the loss is capped at a single wing.
- Breakevens = the short Put strike minus the credit (lower), and the short Call strike plus the credit (upper). Between them is the profit zone.
A worked example
Say a stock trades at $100. You sell the $95 Put and buy the $90 Put; you sell the $105 Call and buy the $110 Call. Both wings are $5 wide, and you collect $1.50 of net credit ($150 per condor).
- Max profit: $150 — kept if the stock is between $95 and $105 at expiration.
- Max loss: ($5 − $1.50) × 100 = $350, if the stock closes beyond $90 or $110.
- Breakevens: $93.50 and $106.50 — the stock can drift about 6.5% either way and you still break even.
- Return on risk: $150 / $350 = about 43% if the trade works.
Sell the $95 Put and $105 Call (red), buy the $90 Put and $110 Call (green) for a $150 net credit. You keep it all between $95 and $105; the long wings cap the loss at $350.
A capped loss still needs an exit plan: our SPY results
Size against the loss, not the win rate. Our SPY archive test puts the winning cycles beside the dollars left over and the worst cycle. The long wings cap the payoff at expiration; they do not make the credit free money.
Across the study window 2010-01-05 to 2023-12-15, the Iron Condor arm retained 163 monthly cycles. It targeted 45 days to expiration (DTE), with short Put/Call deltas near 0.16/0.16 and long Put/Call deltas near 0.07/0.07 in absolute terms. These are delta-selected wings, not the fixed-width strikes in the illustration above.
| Exit rule | Winning cycles (mid) | Average P/L (mid) | Average P/L (ask/bid close) | Worst cycle (mid) | Average days held |
|---|---|---|---|---|---|
| Hold to expiration | 68.1% | $7.04 | $7.04 | -$2,228 | 45.0 |
| Take 25% of opening credit | 90.2% | $17.54 | $15.21 | -$1,323 | 19.5 |
| Take 50% of opening credit | 83.4% | $18.99 | $16.97 | -$2,228 | 29.7 |
| Close at 21 DTE | 66.9% | $2.40 | -$3.31 | -$613 | 24.2 |
| Take 50% of opening credit or Close at 21 DTE | 69.3% | $6.09 | $0.50 | -$613 | 22.0 |
Against holding, the take 50% of opening credit rule produced no change in worst-loss magnitude; the close at 21 DTE rule produced a 72.5% reduction. For that timed exit, average P/L was $2.40 at midpoints and -$3.31 using ask/bid closes, before fees. Read the execution column before choosing a rule. An attractive win rate does not pay the spread or commission.
P/L is dollars per Iron Condor with a contract on each leg, not a return on account equity. Entries use real OptionsDX quote midpoints. Ask/bid closes buy short legs at the ask and sell long legs at the bid on the same midpoint-triggered dates. Targets are checked at daily closes; an unhit profit target holds to expiration. No replacement trade follows an early exit. Fees and early assignment are not modelled. The worst observed cycle is not the maximum loss of your next trade, and the study does not establish a universally best exit. See the full management study.
Enter your actual wings and net credit in the Iron Condor Calculator before sizing the trade. Use its maximum loss for the position you can afford; use this table to see what an exit rule did across an entire historical sample.
When an Iron Condor makes sense
The Iron Condor is at its best on a range-bound stock or index when implied volatility is elevated — high IV fattens the credit, and a quiet stock lets the options decay to zero. Many Sellers open condors in the calm stretches between earnings and avoid holding them through an event, where a large gap can blow through a wing. Size the trade against the max loss, not the credit: a string of small wins can be erased by one breach if positions are too large. Check the expected move to place your short strikes outside the range the market is pricing in.
The bottom line
An Iron Condor is a bet that a stock stays in a range - you collect a credit from two short spreads and keep it if price drifts, with both sides defined-risk, but size against the max loss because one breach can erase a string of small wins.
Frequently asked questions
What is an Iron Condor in simple terms?
An Iron Condor is a four-leg options trade that profits when a stock stays inside a price range. You sell an out-of-the-money Put Spread below the current price and an out-of-the-money Call Spread above it, collecting two credits. If the stock finishes between your two short strikes at expiration, both spreads expire worthless and you keep the full credit — that is your maximum profit.
Is an Iron Condor bullish or bearish?
Neither — an Iron Condor is market-neutral. It does not need the stock to go up or down; it needs it to stay roughly where it is. The trade makes its maximum profit if the price is between the short Put and short Call strikes at expiration, and loses if the stock makes a large move in either direction.
How does an Iron Condor make money?
Two ways: time decay and a quiet stock. You collect the credit up front, and as long as the price stays inside your range, the options you sold lose value every day (theta decay) until they expire worthless. You buy them back cheaply or let them expire, keeping the difference. The trade wins on the passage of time, not on direction.
What is the maximum loss on an Iron Condor?
The maximum loss is the width of one spread minus the net credit you collected, multiplied by 100. If your spreads are $5 wide and you took in $1.50 of credit, the most you can lose is ($5 − $1.50) × 100 = $350 per condor. Because both spreads cannot be breached at once, only one side can reach full loss — which is why an Iron Condor is a defined-risk trade.
When should you use an Iron Condor?
Iron Condors suit range-bound stocks or indexes when implied volatility is elevated (so the credit is rich) and you expect the price to stay put — for example, the quiet weeks between earnings. Compare the credit with the wing risk and the expected move; high IV alone is not a reason to enter.
Related questions
- What is the difference between an Iron Condor and an Iron Butterfly?
- What is a condor spread, the all-Puts or all-Calls version?
- How do Iron Condors compare to selling Strangles?
- What is a Bull Put Spread, the lower wing of the condor?
- What is the expected move and how do I place my short strikes outside it?
Related tools and guides
Run your own numbers in the Iron Condor Calculator, or model a single wing with the Bull Put Spread Calculator. Weighing it against the higher-credit cousin? See Iron Condor vs Iron Butterfly, or the all-Puts / all-Calls version in Condor vs Iron Condor, and map any structure in the Payoff Diagram Builder.
Educational explainer only — not financial advice. Examples are illustrative and exclude commissions, early assignment and dividends. Confirm the mechanics and size positions to your own risk tolerance.