Iron
Condor

What it is

An iron condor combines two credit spreads: a bull put spread below the market and a bear call spread above it, same expiry. You collect a net credit and keep it if the underlying stays between the two short strikes. It's a neutral strategy that profits from range-bound prices and time decay.

Key facts

• Market view: neutral / range-bound, ideally with falling volatility.
• Construction (4 legs): Sell OTM put + Buy further-OTM put; Sell OTM call + Buy further-OTM call.
• Net result: credit — you receive premium upfront.
• Max profit: the net credit received (all legs expire worthless).
• Max loss: width of one spread − net credit.
• Breakevens (two): short put strike − net credit, and short call strike + net credit.

How to construct it

• Choose short strikes outside your expected range (e.g. around prominent OI support/resistance).
• Buy protective wings further out to cap risk on each side.
• Keep both spreads the same width so risk is symmetric.

Worked NIFTY example

NIFTY at 22,500. Sell 22,300 put / buy 22,200 put, and sell 22,700 call / buy 22,800 call, for a net credit of 40 (illustrative; each spread is 100 wide):

• Max profit: 40 (net credit), if NIFTY expires between 22,300 and 22,700.
• Max loss: 100 − 40 = 60, if NIFTY expires beyond 22,200 or 22,800.
• Breakevens: 22,300 − 40 = 22,260 and 22,700 + 40 = 22,740.

When to use it

• You expect the market to stay in a range into expiry.
• Implied volatility is high and likely to fall (you're a net seller of premium).
• You want defined risk on both sides, unlike a naked strangle.

Risks to respect

• A strong trend or gap beyond a short strike turns it into the max loss quickly.
• Four legs mean more charges; manage early rather than holding to the last day.
• Profit is capped at the credit — it's an income trade, not a home run.

Related strategies

• Long Call — directional bullish.
• Bull Call Spread — moderately bullish.
• What is max pain? — useful for picking condor strikes.