The iron condor

A put spread below the stock and a call spread above it, sold together.
You are paid twice for one opinion: that the stock stays between two lines.

What it is

Four legs, one expiry. Two of them you sell, two you buy.
A bull put spread below the money.
A bear call spread above it.
Both credits are paid to you when you open, which is why the credit is roughly double a single spread’s.

What you are actually agreeing to

You keep everything if the stock finishes between the two strikes you sold.
Only one side can ever be breached — the stock cannot finish below your put and above your call at once.
The two long legs cap both ends.
You are not predicting direction. You are predicting a range, which is a different kind of claim.

The trade, written out

Everything above is the idea. This is the position — the lines you would actually send to a broker.

Order ticket

Leg	Action	Qty	Expiry	DTE	Strike	Delta	Price
1	Sell to open	-1	16 Oct 26	45	95 Put	+0.25 (25Δ)	$1.35
2	Buy to open	+1	16 Oct 26	45	90 Put	-0.10 (10Δ)	$0.41
3	Sell to open	-1	16 Oct 26	45	106 Call	-0.29 (29Δ)	$1.50
4	Buy to open	+1	16 Oct 26	45	111 Call	+0.14 (14Δ)	$0.59
Net	Credit	1 position	16 Oct 26	45	$5 wide	+0.00	$1.84

SELL -1 IRON CONDOR XYZ 16 OCT 26 90/95/106/111 COMBO @ 1.84 CREDIT

Reading it back

Four legs, one expiry. The ticket is one order, not two.
The two short strikes set the range you are being paid to define.
The two long strikes are the caps, one on each side.
The net credit is the sum of both spreads less what the wings cost.

The argument

Bull

makes the claim

Most of the time a stock does nothing much. This gets paid for exactly that. Two credits, one position, and a range wide enough that the stock has to genuinely go somewhere before I am in trouble.

Bear

doubts it

You have doubled the income and doubled the number of ways to be wrong. Every gap, every earnings surprise, every rate decision is a threat to one end or the other. And you can only ever collect one credit’s worth of extra safety, because only one side can lose.

Ferret

settles it

Both of you are arguing about the middle. What settles it is the tail: how often the stock leaves the range, and how much it costs when it does. Name the deltas, the width and the exit, and that is measurable.

The shape of it

The iron condor on XYZ at $100 · 25% volatility · 4% rate · 45 days. Priced from the model, not written by hand.

	At expiry
Credit taken in	$184
Maximum profit	$184
Maximum loss	$-316
Breakevens	$93.16, $107.84

A tent. Flat and profitable across the middle, falling away at both ends.
Maximum profit is the whole credit, collected anywhere between the two short strikes.
Maximum loss is one width less the credit — the table above computes it rather than asserting it.
Two breakevens, not one. The range you are actually being paid to hold is between them, and it is wider than the strikes suggest.

Where you actually enter

The chart above is the shape at expiry. It puts the bend right next to the money, which makes the trade look like it is already on the edge. It is not — here is the day you open it.

The same structure set up at 20Δ · 45 days · credit $134. The shaded band is the room between the stock and the strike you sold.

The same price, two different days

	On day one	At expiry
Stock at $94 (the strike you sold)	$-67	$134
Stock unchanged at $100	$0	$134

You enter in the middle, with both short strikes some way off.
The day-one line is far flatter than the expiry tent. Almost nothing is decided at the start.
At either short strike the two days disagree exactly as they do on a single spread.
The tent only sharpens near the end, which is when a condor becomes a different trade from the one you opened.

Different ways to set it up

The same two dials as a single spread, applied to both sides at once. Every panel is a $5-wide condor on the same $100 stock.

The panels below draw the put side’s room, because that is where the shaded band is measured. The call side moves in step with it.

Same delta, four tenors

Days	Short strike	Away from spot	Credit	Max loss	Risk : reward
7	97	+3.0%	$71	$-429	6.0 : 1
21	95	+5.0%	$98	$-402	4.1 : 1
45	94	+6.0%	$134	$-366	2.7 : 1
90	92	+8.0%	$154	$-346	2.3 : 1

A short-dated condor is a narrow tent. There is very little room between the two strikes and no time to be wrong in.
A long-dated one is wide and slow. More room, more credit, and months of carrying it.
The risk-to-reward column is the honest comparison — more credit is not more edge if the risk grew faster.

Same tenor, three deltas

Delta	Short strike	Away from spot	Credit	Max loss	Risk : reward
40Δ	99	+1.0%	$307	$-193	0.6 : 1
25Δ	95	+5.0%	$171	$-329	1.9 : 1
15Δ	92	+8.0%	$99	$-401	4.1 : 1

Closer to the money is a narrower range and a bigger credit.
Further out is a wider range and a worse ratio.
The two sides do not sit at the same distance even at the same delta — the tables above compute both, and the call side is always further out.
In the market that gap widens, because downside fear is priced higher than upside hope. These pages use one volatility throughout, so that part is not in the numbers.

A condor built to the same delta on both sides is not centred on the stock, and it is not meant to be.

What the Greeks are doing

Four questions about the same position, and a fifth that barely applies here.
Every structure answers them differently, which is why this site never writes a general page about the Greeks.

Days left	Delta	Gamma	Theta / day	Vega	Rho
45	+0.2	-3.01	$+2.55	$-9.27	$+0.25
21	+0.8	-5.86	$+5.00	$-8.44	$+0.10
7	+1.4	-6.37	$+5.44	$-3.05	$+0.03

The position at entry — stock $100 · 25% volatility. Per contract, from the model.

Delta — which way you need the stock to go

Close to flat at entry, by design.
It does not stay flat — the moment the stock moves, one side starts to dominate.
A condor is a delta-neutral trade only on the day you open it.

Theta — what time does to you

Positive, and roughly double a single spread’s, because you sold two.
This is the entire sales pitch for the structure.

Vega — what a change in fear does to you

Short volatility on both sides at once.
A volatility spike hurts both spreads even if the stock stays inside the range.
That is why a condor can be marked at a loss while still being perfectly on track.

Gamma — how fast your delta turns against you

Negative, and it concentrates at whichever short strike the stock is nearest.
The middle of the tent is calm. The edges are not.

Rho — what a change in interest rates does to you

The two sides partly cancel, so it is smaller here than on a single spread.
One line, and then we move on.

Theta and gamma are one thing

This is the part that decides whether the strategy works, and it is almost never put plainly.

You cannot be paid theta without being short gamma. They are not two features of the trade. They are the rent and the risk on one lease.

The same position, three points in its life

Nothing about the position changes.
The stock sits still at $100 throughout.
Only the days left move.

Days left	Delta	Gamma	Theta / day	Vega	Rho
45	+0.2	-3.01	$+2.55	$-9.27	$+0.25
21	+0.8	-5.86	$+5.00	$-8.44	$+0.10
7	+1.4	-6.37	$+5.44	$-3.05	$+0.03

Now move the stock to $95.50

Same three dates, same condor.
Now with the stock pushed down to the put side’s short strike — one edge of the tent.

Days left	Delta	Gamma	Theta / day	Vega	Rho
45	+13.3	-2.51	$+1.80	$-7.07	$+1.83
21	+25.3	-4.27	$+3.05	$-5.60	$+1.48
7	+38.3	-9.39	$+6.92	$-4.11	$+0.72

Gamma goes from -2.51 to -9.39.
Theta goes from $+1.80 a day to $+6.92.
Both climb, and neither is available without the other.
Delta now moves roughly 4 times as far for every dollar the stock travels.

Which is what DTE actually sets

Shorten the tenor and both the income and the violence rise together.
On a condor that happens at two strikes at once, which is why the last week of one is so unpleasant to hold.
A time exit is doing more work here than on any other structure on the site.

The trap

The trap on a condor is the maximum loss, and it catches experienced traders.

The most you can lose is one width less the credit — not two, and not the width.

You sold two spreads, so it feels like two lots of risk.
Only one side can finish in the money. The stock cannot be below your put strike and above your call strike at the same time.
So the maximum loss is one width, and the credit from both sides comes off it.
The table in section four computes that number rather than repeating the claim.

Why it matters

Sizing it as though both sides can lose means trading half the position you could have.
Sizing it as though the credit is free money means trading far too much.
Getting this wrong is the most common reason a condor strategy that works on paper wrecks an account.

How this shows up in our tests — pending. No result has been published on this structure yet.