What is an Iron Condor?
An Iron Condor combines a put option spread below the market and a call option spread above the market — simultaneously. You collect credit from both sides and keep all of it if the market stays within your defined range at expiry. Both maximum profit and maximum loss are completely capped from day one. This is the most popular income strategy for retail F&O traders in India.
Nifty at ₹22,000. No major events this week. IV Rank at 55% — options are expensive relative to recent history. You sell the 21,500 Put (collect ₹55), buy the 21,200 Put (pay ₹20, your lower wing), sell the 22,500 Call (collect ₹50), buy the 22,800 Call (pay ₹18, your upper wing). Net credit: ₹67 × 75 = ₹5,025 deposited into your account immediately. Your only job: wait. If Nifty stays between 21,500 and 22,500 at expiry — which happens roughly 65–70% of normal months — you keep all ₹5,025.
Like running tollbooths on both ends of a highway and collecting fees from traffic in both directions. As long as cars (Nifty) travel the road between your booths, you collect tolls every day. If a sudden convoy overwhelms one booth (a big market move), your loss is limited — you've built reinforced walls beyond each booth. The road is most profitable during boring, uneventful periods — which is most of the time.
At a Glance
Max Profit
Net credit from both spreads
Max Loss
Spread width − Net credit
Breakeven
Between both short strikes
Type
Credit · Defined · 4 Legs
How to Set It Up
All four legs must be placed simultaneously with the same expiry. The two "wings" (bought options) are non-negotiable — they cap your maximum loss.
| Action | Type | Strike | Expiry | Qty |
|---|---|---|---|---|
| Buy | Put (PE) | Far OTM — lower wing | Same expiry (21–45 DTE) | 1 Lot |
| Sell | Put (PE) | OTM lower — below price | Same expiry | 1 Lot |
| Sell | Call (CE) | OTM upper — above price | Same expiry | 1 Lot |
| Buy | Call (CE) | Far OTM — upper wing | Same expiry | 1 Lot |
Payoff at Expiry
The characteristic "tent" shape — flat maximum profit in the middle zone, falling to a defined maximum loss on both sides.
Iron Condor
📊 Iron Condor — Payoff Chart + P&L Calculator
Nifty Price: 22000 · Long Put Strike: 21200 · Short Put Strike: 21500 · Short Call Strike: 22500 · Long Call Strike: 22800 · Short Put Prem: 55 · Short Call Prem: 50 · Long Put Prem: 20 · Long Call Prem: 18 · Lot Size: 75 · Price at Exit: 22000
Understanding the Greeks
- Delta (near zero — direction neutral): An Iron Condor doesn't bet on direction. Large moves in either direction work against you. Small oscillations within your range are your best friend.
- Theta (highly positive): This is the entire appeal of the Iron Condor. All four options decay in your favour every quiet day. In a calm week, you see steady daily profit from theta alone.
- Vega (negative): Rising IV temporarily marks against you — which is why you enter in HIGH IV environments. When IV reverts after the event (IV crush), both spreads compress profitably.
- Gamma (negative): Sharp moves create accelerating losses near your sold strikes. The wings cap your maximum loss, but gamma causes rapid P&L swings in the final 2 weeks. Exit at 50% profit to avoid this.
When Should You Use This Strategy?
✓ When to Use / ✕ When to Avoid / ◉ IV / ◷ DTE
4 use items · 3 avoid items
Worked Example
Nifty at ₹22,000. Quiet month ahead. IV Rank at 55%. 300-point spreads on each side.
⊞ Trade Table
4 legs · 0 scenarios
Net credit: (₹55 − ₹20) + (₹50 − ₹18) = ₹67 × 75 = ₹5,025 received upfront
Profit zone: Nifty between ₹21,500 and ₹22,500 (±4.5% from entry)
Max loss: (₹300 − ₹67) × 75 = ₹16,875 if either wing is fully breached
⊞ Trade Table
0 legs · 5 scenarios
Key Points to Remember
- Place your short strikes at ±1 standard deviation from the current price — this gives approximately 68% historical probability of full profit on Nifty monthly expiries.
- The wings are non-negotiable. Never remove them to "save" premium. Without them you have a Short Strangle with unlimited risk on both sides.
- Monthly Iron Condors on Nifty are the foundation of thousands of retail income portfolios in India. Consistent, mechanical, well-suited to how Indian indices behave.
- Close at 50% of credit received. The remaining profit isn't worth the gamma risk, especially in the final 2 weeks before expiry.
