Iron Condor
A four-leg position writing an out-of-the-money call and put while buying further out-of-the-money protection on both sides.
Formula
Net Credit = Premiums Received - Premiums Paid; Maximum Loss = (Width of the Wider Wing - Net Credit) x Lot Size
Unit
₹
In depth
The iron condor is a written strangle with defined risk: the two purchased wings cap what would otherwise be an unbounded loss, at the cost of reducing the premium collected. Its payoff is a plateau of profit between the written strikes, falling away on both sides, so it profits when the underlying stays within a range. The risk-reward ratio is deliberately unattractive on paper — small maximum gain against a larger maximum loss — and it relies on the range holding most of the time. Four legs mean four sets of transaction costs and four bid-ask spreads, which is a material drag on a strategy with a small maximum gain.
Worked example
Write a 24,200 call at 190 and a 23,800 put at 110; buy a 24,600 call at 70 and a 23,400 put at 45. Net credit 185, so maximum gain is ₹13,875 and maximum loss (400 - 185) x 75 = ₹16,125.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Iron Condor” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.