Overview
An iron condor is a short strangle with insurance. You sell an out-of-the-money call and put for income, then buy a further out-of-the-money call and put as wings. The wings convert the open-ended risk of a strangle into a strictly defined maximum loss.
It is the workhorse range strategy for professionals: a high probability of keeping a modest credit, with a known worst case and far lighter margin than a naked strangle. You profit when price stays inside the short strikes through expiry.
How it’s built
Sell an OTM call and an OTM put (the body), and buy a further OTM call and put (the wings), all same expiry. Net credit in; the loss is capped by the wing width.
| Action | Option | Strike | Premium | Role |
|---|---|---|---|---|
| Sell | Put (PE) | 23,800 | 80 | Sell — put body |
| Buy | Put (PE) | 23,600 | 40 | Buy — put wing |
| Sell | Call (CE) | 24,200 | 90 | Sell — call body |
| Buy | Call (CE) | 24,400 | 45 | Buy — call wing |
Payoff at expiry
The diagram is computed from the legs above on an illustrative NIFTY 50 snapshot — spot 24,000, one lot of 75.
Worked example — NIFTY 50
With NIFTY at 24,000, you sell the 23,800 put and 24,200 call (collecting 80 + 90) and buy the 23,600 put and 24,400 call (paying 40 + 45). The net credit is 85 points (₹6,375 per lot).
You keep the full credit anywhere between 23,800 and 24,200. The worst case is capped at 115 points (the 200-wide wing minus the 85 credit, ₹8,625 per lot) if price runs to either wing. Breakevens sit at 23,715 and 24,285.
At expiry
| If the market… | Outcome |
|---|---|
| NIFTY between 23,800–24,200 | Maximum profit — keep the full credit |
| NIFTY at 23,715 or 24,285 | Breakeven on either side |
| NIFTY beyond a wing | Maximum loss — capped by the wing |
Greeks & behaviour
When to use it
- You expect a range-bound market and want defined risk, not a naked strangle.
- You want a repeatable, high-probability income structure with light margin.
- Implied volatility is elevated relative to the expected move.
Risks & caveats
- Reward is small versus risk — a single max-loss event erases several wins.
- A trending market can pin price at a wing for the full defined loss.
- Four legs mean more commissions and slippage to manage.
Key takeaways
- The professional, risk-defined way to sell a range.
- Known maximum loss and far lower margin than a strangle.
- Win often, lose small — but keep losers strictly within the wings.
Test this on live data
Load the Iron Condor preset in the Strategy Builder to see real strikes, premiums and a live payoff graph.
Educational content only — not investment advice or a recommendation. All strikes, premiums and figures are illustrative and do not reflect live market quotes. Options carry significant risk; consult a registered adviser before trading.