Iron Condor: The Defined-Risk Premium-Selling Strategy

An iron condor combines a bull put spread and a bear call spread on the same underlying and expiration. Sell an OTM put and OTM call (the short strikes), buy further OTM puts and calls (the wings). Net credit. Defined risk on both sides.

The structure: sell 0.20–0.30 delta put, buy further OTM put 5–10 strikes below; sell 0.20–0.30 delta call, buy further OTM call 5–10 strikes above. 30–45 DTE. Net credit collected. Profit zone is the entire range between the short strikes. Max loss is the strike width minus net credit on either side, whichever side is breached.

Iron condors print in low-realized-volatility regimes where the underlying stays inside the short strikes and IV contracts. The strategy underperforms in trending markets (one short side will be breached) and crisis regimes (gap risk on a defined-risk structure is capped, but adverse moves still produce max loss frequently). Run on diversified, liquid tickers with elevated IV rank; size each position to survive max loss without harming the account.

Frequently Asked Questions

Iron condor or short strangle?

Iron condor for defined-risk and smaller accounts. Short strangle for larger accounts that can absorb undefined risk in exchange for higher premium yield.

What's the typical iron condor profit-take?

50% of max credit. Holding for the last 50% rarely justifies the time and gamma exposure.

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