Iron Condor Calculator
An iron condor is a four-leg, defined-risk, neutral strategy. Sell a put spread and a call spread simultaneously. You collect a net credit and profit if the stock stays inside the short strikes — harvesting time decay in range-bound underlyings.
Price it
Practical example
When to use it
- You think RV < IV and expect the underlying to stay inside a defined range
- Implied volatility is elevated (a common rule of thumb: IV rank above 30) — this is when premium selling pays
- You want the defined risk of wings over the uncapped tail risk of a naked short strangle
- Time horizon: 30–45 DTE at entry is the classic sweet spot — enough theta to harvest, not so close that gamma is extreme
Risks
- Max loss is significantly larger than max profit — disciplined sizing and management matter more than being right on any single trade
- A strong trend tests one wing; the short strike starts losing money quickly because it picks up delta and vega simultaneously
- Gamma risk accelerates as expiration approaches — the closer to expiry, the faster P&L whipsaws on small price changes
- IV expansion hurts the position mark-to-market even if price eventually holds
The deeper breakdown
How an Iron Condor Works
An iron condor is a four-leg, defined-risk, short-vol structure: a bull put spread below the stock + a bear call spread above the stock, same expiration. You collect a net credit. Max profit is the credit, realized if price stays between the short strikes. Max loss is capped by the long wings.
Example
AAPL at $195. Sell the $190 put / buy the $185 put (bull put spread). Sell the $200 call / buy the $205 call (bear call spread). Net credit: $1.42 ($142). Max loss = ($5 − $1.42) × 100 = $358.
The Real Bet: RV < IV, In a Range
An iron condor is the defined-risk version of a short strangle. Like the strangle, you're selling the market's implied move, betting realized volatility comes in lower than implied. Unlike the strangle, the long wings cap your catastrophic tail and let you size the position without worrying about overnight gap risk.
Strike Selection
Common approaches:
Greek Profile
Management
Typical playbook: enter 30–45 DTE, take profit at 25–50% of max credit, manage at 21 DTE (close or roll) regardless of P&L to avoid gamma risk in the last weeks. Rolling the tested side for a credit and keeping the untested side is a common adjustment; adding inversion (rolling strikes past each other) is an experienced-trader maneuver.
Key Takeaway
Iron condors are the defined-risk workhorse of premium selling. Edge comes from selling overpriced IV, sizing such that max loss is survivable, and cycling trades with discipline rather than holding to expiration for the last nickel.
Calculations are theoretical projections from standard pricing models (Black-Scholes), not predictions. Real fills, slippage, dividends, and volatility shifts will cause outcomes to differ. Not investment advice. Full disclaimer.