Options / Iron condor
Payoff at expiry for a generic example with the stock at 100. Green is profit, red is loss, dashed lines are break-even prices.
A bull put spread and a bear call spread together. You receive a credit and keep it if the stock finishes between the two sold strikes.
When it is used: When you expect little movement, for example between earnings dates.
Main risk: A move beyond either bought strike produces the maximum loss, which is larger than the credit.
- Net credit
- $240 per contract
- Max gain
- +$240
- Max loss
- -$260
- Break-even
- 92.6 / 107.4
- Legs
- 4
The legs in this example
| Action | Contract | Strike | Example price |
|---|---|---|---|
| Buy | 1 put | strike 90 | $1.00 per share |
| Sell | 1 put | strike 95 | $2.20 per share |
| Sell | 1 call | strike 105 | $2.20 per share |
| Buy | 1 call | strike 110 | $1.00 per share |
The Greeks for this strategy
The Greeks measure what moves the price of an option. The values below are model estimates for the generic example (stock at 100, 40% volatility, three months to expiry), only to show the direction of each effect.
| Greek | What it measures | This example | What it means here |
|---|---|---|---|
| Delta | How much the position gains or loses for a $1 move in the stock, per 100 shares. | +1 shares | Roughly neutral to small moves. |
| Gamma | How fast delta changes as the stock moves. | -0.35 | Little change in delta. |
| Theta | Value gained or lost each day from time passing, all else equal. | +0.76 $/day | Time has little effect. |
| Vega | Change in value for a one-point rise in implied volatility. | -3.49 $/pt | Rising implied volatility hurts you; falling helps. |
| Implied volatility (IV) | How much movement the market prices in per year. | 40% in this example | Higher IV makes options cost more. Positions with positive vega gain when it rises. |
Results for this strategy
We track our own hypothetical examples privately and publish each result at least 30 days after the play has closed, wins and losses together, once there are enough closed plays to say something. None have closed yet. This table will list every closed play with its expiry result and a link to the research it came from.
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