What is an iron condor?

An iron condor profits from low volatility in the underlying asset. What Is an Iron Condor Example? An iron condor example would be when a 75-80 bull put spread is combined with a 95-100 bear call spread. This creates a short iron condor: the difference is 15 points for the strike price of the short options and five points for both spreads.

What is the maximum profit for an iron condor?

The maximum profit for an iron condor is the amount of premium, or credit, received for creating the four-leg options position. The maximum loss is also capped. The maximum loss is the difference between the long call and short call strikes, or the long put and short put strikes.

What is the Upside and downside risk of the iron condor strategy?

The iron condor strategy has limited upside and downside risk because the high and low strike options, the wings, protect against significant moves in either direction. Because of this limited risk, its profit potential is also limited.

Can a trader open an iron condor on stock XYZ?

For example, suppose that stock XYZ is trading at $50, and a trader does not expect the share price to move much in the near term. Using the steps above, a trader could open an iron condor on stock XYZ with the following options with the same expiration: