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Iron condor

A short strangle with seatbelts. Four legs, a range-bound view, and a loss that can never surprise you.

Lesson 10 of 128 min read

Building it from pieces you already know

An iron condor is just two credit spreads stuck together:

  • a bull put spread below the market (sell 22100 PE, buy 21900 PE), and
  • a bear call spread above the market (sell 22700 CE, buy 22900 CE).

Or think of it as a short strangle with wings: the two sold options collect premium, and the two cheaper bought options cap the damage if NIFTY breaks out.

LegActionOptionPrice
1Buy21900 PE₹48.30
2Sell22100 PE₹91.25
3Sell22700 CE₹127.35
4Buy22900 CE₹73.05
Net credit₹97.25
Max profit
₹6,321
97.25 × 65 — anywhere 22,100 to 22,700
Max loss
₹6,679
(200 − 97.25) × 65 — below 21,900 or above 22,900
Lower breakeven
22,002.75
Upper breakeven
22,797.25
22,400

If NIFTY ends at 22,400, you make ₹6,321.

Iron condor 21900/22100/22700/22900 — a flat-topped table. Both the profit and the loss have a ceiling.
NIFTY at expiryWhat happensNet P&L (1 lot)
21,600Put spread at max loss, call spread keeps credit−₹6,678.75
22,000Inside the put spread−₹178.75
22,100 – 22,700Everything expires worthless+₹6,321.25
22,800Inside the call spread−₹178.75
23,200Call spread at max loss−₹6,678.75

Why the iron condor is so popular

Short strangle 22100/22700

  • Collects ₹14,209.
  • Unlimited loss beyond the breakevens.
  • High margin.
  • A gap-up or crash can be devastating.

Iron condor with 200-point wings

  • Collects ₹6,321 — less, because you paid for the wings.
  • Worst case is known on day one: ₹6,679.
  • Much lower margin, since risk is capped.
  • You can sleep through a gap.

You give up some premium to buy certainty. For most traders, that's a trade worth making.

Tuning the condor

  • Wider short strikes (e.g. 22000/22800): higher chance of profit, smaller credit.
  • Wider wings (e.g. 300 points): bigger credit, bigger max loss.
  • Rule of thumb: many traders place the short strikes around 1σ away, so the market has roughly a two-in-three chance of staying inside.

Quick check

Your iron condor's sold strikes are 22,100 and 22,700. NIFTY expires at 22,650. What happens?