Iron Condor Calculator

An iron condor sells an out-of-the-money put spread and an out-of-the-money call spread on the same expiry. The four legs bring in a credit, and that credit is the most the position can make. It is a bet that the stock stays inside a range until expiry, and it is popular because the risk is defined on both sides from the start.

When it is used

Traders reach for a condor when implied volatility is high relative to how much they expect the stock to move, often after an earnings move or a sell-off has already happened. The wider the short strikes sit from the current price, the higher the chance of keeping the credit, and the smaller that credit is. The width between each short strike and its protective long strike sets the maximum loss: the spread width times one hundred, minus the credit received.

How it makes and loses money

Time passing and volatility falling both help, because the short options lose value faster than the long ones. A sharp move toward either short strike hurts, and the loss is capped once the stock passes the long strike on that side. Most of the profit tends to arrive in the last weeks, which is also when a late move is hardest to manage.

What to check in the grid

Look at the rows at each short strike and the columns a few weeks before expiry. That is where a condor shows a loss even though the stock is still inside the range. Shifting implied volatility up by a few points shows how much a volatility spike costs before expiry.