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BlogPublished June 18, 2026 · 16 min read
Iron Condors Explained: Defined-Risk Premium Selling for Range-Bound Markets
Iron condors explained: how the four-leg defined-risk structure collects premium, how to set strikes and width, plus seven rules and journal fields for sellers.
An iron condor is the defined-risk way to sell premium when you expect a stock or index to stay in a range. It pairs a put credit spread below price with a call credit spread above it.
You collect two credits up front. Both wings cap your loss, so the trade never carries the open-ended risk of a naked strangle—at the cost of a lower credit and a profit ceiling.
This guide breaks down iron condor mechanics, strike and width selection, the trade-offs versus single spreads and strangles, seven pre-trade rules, and the fields to log so each four-leg position stays readable in your journal.
You will learn what an iron condor is, how it differs from a short strangle and a single credit spread, and how to size and log the four legs.
What is an iron condor?
An iron condor combines two vertical credit spreads on the same expiration: a put credit spread below the current price and a call credit spread above it. You sell the inner strikes (closer to price) and buy the outer strikes (the wings) for protection.
The four legs of an iron condor:
- Sell an out-of-the-money put (collect premium)
- Buy a further out-of-the-money put (defines downside)
- Sell an out-of-the-money call (collect premium)
- Buy a further out-of-the-money call (defines upside)
The CBOE education center covers multi-leg spreads; the OCC standardizes how each leg settles at expiration.
Payoff: max profit, max loss, and breakevens
Max profit is the total net credit, kept if price finishes between the two short strikes at expiration. Max loss is roughly the width of one spread minus the net credit—only one side can be breached at a time, so loss is defined by the wider wing, not both.
Iron condor key levels:
- Max profit — net credit received (both spreads expire worthless)
- Max loss — spread width × 100 minus net credit, on the tested side
- Upper breakeven — short call strike + net credit
- Lower breakeven — short put strike − net credit
Choosing strikes, width, and expiration
Most sellers place the short strikes by delta to target a probability of profit, then choose a wing width that balances credit against max loss. Wider wings collect more but risk more; tighter wings cap loss but pay less.
Practical setup tips:
- Short strikes near 15–20 delta are a common starting range for higher win rate
- 30–45 DTE balances premium against gamma risk into expiration
- Keep both wings the same width so max loss is symmetric and easy to log
- Center the condor on a range you can defend—not just where premium looks fat
Delta-based strike selection deserves its own checklist—see how to choose option strikes by delta and probability and IV rank and implied volatility for when premium justifies the trade.
Iron condor vs. strangle vs. single spread
| Structure | Risk | Credit | Best when |
|---|---|---|---|
| Iron condor | Defined (both wings) | Lower | Range-bound, want capped loss |
| Short strangle | Undefined | Higher | High IV, large account, can manage |
| Single credit spread | Defined (one side) | Lowest | Directional lean, smaller capital |
An iron condor is essentially a short strangle with protective wings. You give up credit for a defined max loss and lower buying-power requirements—often the better fit for retail accounts. Compare the undefined-risk version in short strangles explained.
7 rules before selling an iron condor
Seven pre-trade rules:
- I have a range thesis—not just attractive premium
- Both wings are equal width, so max loss is symmetric
- Short strikes match my target delta and probability of profit
- Earnings and major events are off the calendar inside this expiration
- Max loss fits my position-sizing rules for one trade
- I have a management plan: profit target and a tested-side adjustment
- I logged all four strikes, the net credit, and max loss
Many sellers close at a set fraction of max profit rather than holding to expiration—see the 50% profit rule and position sizing and max collateral.
Conclusion: condors reward range discipline
Key takeaways:
- An iron condor sells a put spread and a call spread for two credits
- Both wings cap loss—defined risk, lower buying power than a strangle
- Profit is capped at net credit; you are paid for range, not direction
- Log all four legs and a management plan before you open
Educational only—not personal financial advice. Explore the blog or Request access for more.
Frequently asked questions
- What is an iron condor in options trading?
An iron condor is a four-leg, defined-risk strategy that sells an out-of-the-money put spread and an out-of-the-money call spread on the same expiration. You collect net premium and profit if price stays between the two short strikes.
- What is the maximum loss on an iron condor?
Max loss is approximately one spread's width times 100 minus the net credit, because only one side can finish in the money at a time. The wings cap the loss regardless of how far price moves.
- Is an iron condor safer than a short strangle?
Yes in the sense that loss is defined—the long wings cap risk, where a short strangle has undefined risk. The trade-off is a smaller credit and a capped profit.
- How do I pick strikes for an iron condor?
Most sellers place the short strikes by delta to target a probability of profit, often near 15–20 delta, then choose equal wing widths. See choosing strikes by delta for the full method.
- When should I close an iron condor?
Many sellers close at 25–50% of max profit or with a set number of days to expiration to avoid gamma risk. Holding to expiration maximizes credit but raises pin and assignment risk near the short strikes.
- Can I get assigned on an iron condor?
The short legs can be assigned if they go in the money, especially near expiration or around dividends on the call side. The long wings limit how far that risk extends—see options assignment explained.
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