Definition
An iron condor is a four-leg options strategy that profits when the underlying stays within a defined range. It involves selling an OTM put and call while buying further OTM options for protection. Maximum profit occurs if the stock closes between the short strikes at expiration.
Formula
Max Profit = Net Premium Received | Max Loss = Width of Spread - Premium
Example
Sell $95 put, buy $90 put, sell $105 call, buy $110 call for $2 credit. Max profit $200 if stock stays between $95-$105.
FAQ
What is Iron Condor?
A neutral options strategy combining a bull put spread and bear call spread.
How do you calculate Iron Condor?
A common formula for Iron Condor is: Max Profit = Net Premium Received | Max Loss = Width of Spread - Premium
Why is Iron Condor important?
Iron Condor helps investors evaluate options and make more informed decisions.