Iron condor
A bull put spread and a bear call spread together. You collect premium and keep it if the index stays between the two sold strikes.
How it is built
- Sell an out-of-the-money put and buy a lower put.
- Sell an out-of-the-money call and buy a higher call.
- All four legs have the same expiry and lot count.
A structure for a view that the index will stay within a range until expiry, with losses capped on both sides.
Risks
- A move beyond either sold strike turns the position into a loss; beyond the bought strikes the loss is at its maximum.
- The maximum loss is usually several times the maximum profit.
- Four legs means four sets of charges to open and again to close.
- Selling options needs margin set by the exchange (SPAN plus exposure margin), usually far more than the premium received.
How the Greeks behave
- Delta
- Close to zero at the start
- Theta
- Positive
- Vega
- Negative: rising volatility hurts
Worked example on Nifty 50
| Leg | Premium per unit | Cash flow |
|---|---|---|
| Buy 1 lot 24,250 PE | ₹10.20 | −₹663 |
| Sell 1 lot 24,500 PE | ₹32.49 | +₹2,112 |
| Sell 1 lot 25,500 CE | ₹44.20 | +₹2,873 |
| Buy 1 lot 25,750 CE | ₹15.76 | −₹1,025 |
Profit and loss at expiry
For the whole position, before charges.
Premiums are theoretical Black–Scholes values from round, illustrative inputs, not market prices. Charges and margin are not included.Price a single leg with your own numbers.
Iron condor on other indices
Frequently asked questions
What is the maximum profit on an iron condor?
The total net premium received, if the index ends between the two sold strikes at expiry.
What is the maximum loss?
The width of one spread minus the net premium, times the lot size, if the index ends beyond either bought strike.
How much margin does an iron condor need?
Because both sides are hedged, brokers charge roughly the margin of one spread, far less than for a short strangle. Check your broker's margin calculator.