What is an iron condor?

Short answer

An iron condor combines a short put spread below the price and a short call spread above it. You collect a credit and keep it if the stock stays between the short strikes until expiration. Profit and loss are both capped, so it suits range-bound, high-IV markets.

SPY gamma levels, live

As of Oct 16, 7:49 PM ET

How it is built

Sell an out-of-the-money put and buy a lower put.
Sell an out-of-the-money call and buy a higher call.
Max profit = credit received. Max loss = width of one spread minus the credit.

Managing it (examples, not advice)

Many traders take profits at 50% of the credit.
Gamma walls and the expected move help place the short strikes.
Close or adjust if price tests a short strike instead of hoping.

Common questions

Is an iron condor low risk?

Risk is defined, but losses can be several times the credit. The high win rate comes with uneven payoffs.

When do iron condors work best?

When implied volatility is high and the stock moves less than options priced in.

Can both sides lose?

At expiration only one side can be in the money, so the max loss is one spread width minus the credit.

Go deeper with Rebel Intel

Build an SPY iron condor example around the expected move Show me the gamma levels for SPY Compare iron condors and butterflies

Educational only, not investment advice. Options involve risk and are not suitable for all investors. See how Intel is reviewed.