Snapshot
Legs
Sell 1 Low Put + Buy 1 Mid-Low Put + Buy 1 Mid-High Call + Sell 1 High Call
Outlook
High Volatility / Direction Agnostic
Max profit
Width of long spread minus net debit paid
Max Loss
Net debit paid
A long iron condor option strategy involves buying an out-of-the-money put spread and an out-of-the-money call spread on the same stock with identical expiration dates. Specifically, you sell a low-strike put, buy a higher-strike put, buy a lower-strike call, and sell a higher-strike call. You pay a net debit to enter the position. Traders use this when they expect the stock to move sharply in either direction beyond the middle strike prices.
The maximum profit is achieved if the stock price moves far outside the outer strike prices, allowing one of your long spreads to reach full value. The maximum loss is limited to the net debit paid upfront, which happens if the stock stays flat between the two inner strike prices until expiration.
Example
Stock
$100
Trade
- Sell $85 Put for $0.50
- Buy $90 Put for $1.50
- Buy $110 Call for $1.50
- Sell $115 Call for $0.50
→ $2.00 debit ($200)
Breakevens
$88.00 / $112.00
Outcomes
- Stock ≤ $85 or ≥ $115: +$300 Max Profit
- Stock at $88 or $112: $0 Breakeven
- Stock between $90 and $110: -$200 Max Loss