What is an iron condor, in plain words?
An iron condor is four options on one stock with one expiry: a put sold and a lower put bought, a call sold and a higher call bought 1. You receive a net credit, which is the most it can make; the most it can lose is the gap between the strikes of one side minus that credit; it breaks even at the sold put's strike minus the credit and the sold call's strike plus it 1.
A $50 stock, 30 days, 30% implied volatility (made-up numbers): the $47 put and $53 call sold, the $45 put and $55 call bought. Move where the stock ends at expiry.
In numbers
By the formula the four legs come to a credit of $0.71 a share 2, $71 a contract. That is kept if the stock ends between $47 and $53; the most it can lose is $2 − $0.71 = $1.29 a share, and it breaks even at $46.29 and $53.71 1.
The trade-off
A capped gain of $0.71 a share against a capped loss of $1.29 a share. Every leg is a separate order: bought near the ask or sold near the bid 3, four times over.
What this shows, and what it doesn't
The result at expiry, a share, before fees. The sold options can be exercised against you before expiry 4.
Go further
Sources (4), checked 20 October 2026 and 27 October 2026
- Evan Niu, “What Is an Iron Condor?”, The Motley Fool, 11 May 2016. Read it (read 27 October 2026)
- Fischer Black and Myron Scholes, “The Pricing of Options and Corporate Liabilities”, Journal of Political Economy 81(3), 637–654, 1973. Read it (read 20 October 2026)
- US Securities and Exchange Commission, Investor.gov, “Types of Orders”. Read it (read 20 October 2026)
- FINRA, “Trading Options: Understanding Assignment” (14 December 2020). Read it (read 27 October 2026)
Now try it on a scenario of your own
Pick where a simulated stock might be, and by when: drag one dot and see, side by side, what buying shares, one option, or a pair of options (a call or put spread) would each do. Free, no sign-up.
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