What is the Iron Condor Options Strategy?

An iron condor is an options strategy that combines four different options contracts. These are “two call options + two put options” with different strike prices but the same expiry. Generally, an Iron Condor strategy is structured to benefit when the underlying asset remains within a specified price range. 

If we talk about profitability, the investor receives a “net premium” when establishing the position. The maximum profit is usually limited to this net premium. For more clarity, let’s study an example of an Iron Condor strategy NSE:

Suppose the NIFTY is trading at ₹25,000. A trader expects NIFTY to remain within a range until expiry and creates an iron condor:

The trader receives ₹80 (₹80 + ₹90 – ₹50 – ₹40) as the net premium per unit. If NIFTY expires between ₹24,800 and ₹25,200, all sold options remain within their profitable range, and the trader can retain the net premium of ₹80 per unit.

At the same time, the maximum profit is limited to ₹80 per unit, while the bought ₹24,700 Put and ₹25,300 Call limit the potential loss if NIFTY moves sharply outside the range.

Want to Practice an Iron Condor When NIFTY is Range-Bound?

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