Options Strategies
Iron Condor
Learn how an iron condor combines two credit spreads to define a range and cap risk. Includes a worked example, risks and primary sources.
An iron condor combines an out-of-the-money put credit spread and call credit spread with the same expiration. It earns its maximum credit if the underlying finishes between the short strikes, while long wings cap loss. The trade benefits from range-bound outcomes but remains exposed to volatility, execution and assignment.
Primary references: Options Industry Council: Short Condor (Iron Condor) · Cboe Options Institute: Spread Strategies
Definition and mechanics
The two short strikes define the preferred range, and the two further-out long options create protective wings. Profit erodes beyond either breakeven and reaches maximum loss at or beyond a long strike at expiration.
How to evaluate it
Map the two short strikes, two protective wings, net credit, wing widths and both breakevens before comparing an iron condor. Calculate maximum loss as well as maximum profit, then review implied volatility and liquidity across all four legs. Assignment and expiration near either short strike can create outcomes the expiration diagram alone does not show.
Worked example
A $90/$95/$105/$110 iron condor collected for $1 has a $100 maximum credit and a $400 maximum expiration loss before fees if each wing is $5 wide.
Risks and limitations
- The loss can be several times the credit, and four-leg slippage or commissions can materially reduce the expected return.
- Options involve risk and can lose part or all of the capital committed. Multi-leg positions also introduce execution, assignment and management complexity.
Common misconception
Reality check
A high modelled probability of profit does not make an iron condor safe or guarantee that it can be managed cheaply.
Written by Philip Fowdar
Founder and editor, Options Matrix Pro
Philip founded Options Matrix Pro after building a repeatable way to compare options income opportunities across a watchlist. He writes and edits from the experience of designing, testing and using the product.
Frequently asked questions
How does an iron condor options strategy work?
An iron condor combines an out-of-the-money put credit spread and call credit spread with the same expiration. It earns its maximum credit if the underlying finishes between the short strikes, while long wings cap loss. The trade benefits from range-bound outcomes but remains exposed to volatility, execution and assignment.
What is the most important limitation of iron condor?
The loss can be several times the credit, and four-leg slippage or commissions can materially reduce the expected return.
Sources
Verified July 16, 2026
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