The iron condor: getting paid for a range, with the risk capped
Four legs, one credit, and a maximum loss known before you open it.
Updated 2026-10-07
What an iron condor is
An iron condor sells an out-of-the-money put and an out-of-the-money call, the same pair as a short strangle, then buys a further out-of-the-money put and call as protection. The sold legs bring in a credit; the bought legs cost less than that credit and cap the loss on each side. The result is a position paid for the index staying between the two sold strikes.
When traders use it
Condors suit a market expected to stay in a range, often when implied volatility is high enough that the credit is worth collecting. Theta works for the position every day the index stays inside the band, and a fall in implied volatility helps too. The bet is the opposite of a straddle's: not that the move will be bigger than expected, but smaller.
The trade-off in the numbers
The maximum profit is the credit, kept in full only if the index finishes between the sold strikes. The maximum loss is the width between a sold strike and its protecting strike, minus that credit. In most condors the possible loss is larger than the possible profit, and the price of that imbalance is a wide band in which the position wins. Knowing both figures before opening it is the whole appeal.
Managing it
Condor traders usually decide in advance what they will do if the index approaches a sold strike: close the threatened side, roll it further out, or take the defined loss. Watching the position's net delta in the builder shows how quickly a quiet condor becomes a directional bet as the index drifts toward one wing.
A worked example
NIFTY at 24,000, one lot of 65 on each leg. Premiums are illustrative, chosen to be round, not quotes from any session.
- Buy the 23,600 put at 40
- Sell the 23,800 put at 85
- Sell the 24,200 call at 90
- Buy the 24,400 call at 45
- Net premium: a credit of 90 points, or 5,850 rupees per lot.
- Breakevens: 23,710 and 24,290 at expiry.
- Maximum profit: 90 points, or 5,850 rupees per lot.
- Maximum loss: 110 points, or 7,150 rupees per lot.
| NIFTY at expiry | Points | Rupees per lot |
|---|---|---|
| 23,200 | -110 | -7,150 |
| 23,600 | -110 | -7,150 |
| 23,710 | 0 | 0 |
| 23,800 | +90 | +5,850 |
| 24,000 | +90 | +5,850 |
| 24,200 | +90 | +5,850 |
| 24,290 | 0 | 0 |
| 24,400 | -110 | -7,150 |
| 24,800 | -110 | -7,150 |
Charges, taxes and slippage come off every line of that table. The strategy builder draws the same payoff as a curve with live premiums, so you can move a strike and watch every number above change.
Questions people ask
What is an iron condor in simple terms?
It is a four-leg options position that collects a credit for the index staying inside a range. It sells an out-of-the-money put and call, and buys further out-of-the-money options on both sides so the maximum loss is fixed before the trade is opened.
What is the maximum loss on an iron condor?
The width between a sold strike and the protecting strike beyond it, minus the credit received. With 200-point wings and a 90-point credit, the maximum loss at expiry is 110 points per unit.
When does an iron condor lose money?
When the index moves beyond either breakeven by expiry, that is past a sold strike by more than the credit received. A sharp move early in the trade can also show a large loss on paper before expiry, because the sold options gain value quickly as the index approaches them.
Keep going
Educational content only: not investment advice. You are responsible for your own trading decisions.