Type of Strategy

trading     /     investing


neutral to slightly skewed

implied volatility



An iron condor is the concurrent transaction of both an OTM short put spread and an OTM short call spread.  Condors can be built purely of calls or puts, though the combination allows for both sides of the spread to expire without value if the stock remains within the target area.  An iron condor can also be considered as a short strangle with a defined risk limitation on each side.  Iron condors are key tools for option traders and may occasionally find use for an option investor.

Condors are neutral strategies that lose value over time as the stock price remains within the target area between the short strikes.


Condors can be set up exclusively with calls or puts, but the recommended configuration is an iron condor consisting of an OTM short put spread and an OTM short call spread.

Generally, iron condors should be established for a credit that approximates 30-35% of the short spread width.  Placement of the spreads can be skewed directionally to either side.

Preferred expiration is approximately a 45 DTE cycle, with management occurring at approximately 20 days remaining.

example – AAPL

Trader notices high implied volatility for Apple, and wishes to establish a neutral trade to capitalize on the market environment.

Iron Condor: AAPL

1) Apple (AAPL) current price is ~$121/share

2) Trader decides to execute a $5 wide iron condor, based around the $110 / $135 price points.

3) In an offensive account (tax-free), sell a 58 DTE, 22 delta short put spread at $110/$105 for $0.85.

4) In an offensive account (tax-free), sell a 58 DTE, 21 delta short call spread at $135 / $140 for $0.65.

5) Net premium received = $1.50 which is 30% of the spread width ($1.5/$5.0)

6) Max Profit = $1.50  Max Loss = $3.50

7) Break-Even Points:  $108.50 / $136.50


Traders often establish a GTC BTC order for 50% of the maximum profit, in this case a limit debit of $0.75.

If the stock challenges one side of the spread, the unchallenged side can be rolled toward the stock price for an additional credit, reducing risk in the trade.

As time to expiration approaches 20 days, the challenged side of the spread may be considered for a rollout if additional credit can be received.