How to use the iron condor calculator
- Enter the stock price, implied volatility and days to expiration. The four legs are created around the current price.
- Adjust the four strikes: long put, short put, short call, long call.
- Type real prices from your broker for each leg.
- Check max profit, max loss, both breakevens and the probability of profit.
What an iron condor is
An iron condor combines a bull put spread below the current price and a bear call spread above it. You receive a net credit. You keep the full credit if the stock stays between the two short strikes until expiration.
Formulas
- Max profit = net credit received.
- Max loss = width of the wider spread − net credit.
- Lower breakeven = short put strike − net credit.
- Upper breakeven = short call strike + net credit.
- Return on risk = max profit ÷ max loss.
Adjusting the trade-off
Moving the short strikes closer to the stock price increases the credit and the return on risk, but lowers the probability of profit. Moving them further away does the opposite. Watch the probability of profit and the return on risk change together as you adjust strikes in the calculator.
Greeks of an iron condor
An iron condor usually has positive theta (it gains as time passes) and negative vega (it gains when implied volatility falls). Delta is close to zero when the strikes are centered on the stock price.
Frequently asked questions
When does an iron condor make money?
When the stock stays between the short put and short call strikes, and time passes or implied volatility falls.
What is the max loss of an iron condor?
The width of the wider spread minus the credit received, times 100 per contract. It happens if the stock ends beyond either long strike.
Is an iron condor a good strategy for beginners?
It has defined risk, which helps, but it involves four legs and frequent losses when the stock moves sharply. Start small and model it carefully.
Should I close an iron condor before expiration?
Many traders close at 50% of max profit to reduce the risk of a late move. The dashed line on the chart shows the estimated P/L before expiration.
For educational purposes only. Not financial advice. Options involve risk and are not suitable for all investors.