Iron Condor
Sell an out-of-the-money call spread and an out-of-the-money put spread simultaneously. You profit if the stock stays within a range. This is one of the most popular income-generating strategies.
Payoff Diagram
How to Set Up This Trade
Sell an OTM call, buy a further OTM call (call spread). Sell an OTM put, buy a further OTM put (put spread). All four options share the same expiration.
Trade Setup — 4 Legs
When to Use This Strategy
You expect the stock to stay within a defined range through expiration. Best in high-IV environments where premiums are rich and likely to contract.
Tips from the Pros
- 1
Aim for 30-45 DTE and target 1/3 the width of the strikes as credit collected.
- 2
Manage at 50% of max profit — don't get greedy waiting for full expiration.
- 3
If one side is tested, consider closing the untested side to reduce risk or rolling the tested side out in time.
Quick Reference
Max Profit
Limited to the total net credit received from both spreads.
Max Loss
Width of the wider spread minus total credit received (per share). Occurs if the stock moves past either long strike.
Breakeven
Upper breakeven: short call strike + total credit. Lower breakeven: short put strike - total credit.
Best IV Environment
High IV
Time Decay (Theta)
Helps (positive theta)
Risk Level
Medium RiskLearn More
Our courses cover this strategy with real trade examples and live market analysis.
Browse CoursesRelated Neutral Strategies
Other strategies for a neutral market outlook.
Iron Butterfly
Sell an ATM call and an ATM put at the same strike, then buy an OTM call and OTM put for protection. Similar to an iron condor but with the short strikes at the same price, producing more premium and a narrower profit zone.
Short Straddle
Sell an ATM call and an ATM put at the same strike price and expiration. You collect maximum premium and profit if the stock stays near the strike. This is a high-premium, high-risk strategy.
Short Strangle
Sell an OTM call and an OTM put at different strike prices. Similar to the short straddle but with a wider profit range and lower premium collected. Still an undefined-risk strategy.