Neutral options strategy
Iron condor
A bull put spread plus a bear call spread. You profit if the stock stays between the two short strikes.
NeutralHigh IV (selling rich premium)Defined riskLevel 4 · Selling premium
Iron condor payoff
An example on a $100 stock with 30% implied volatility. The dashed line is the profit or loss at expiry; the solid line is what the position is worth today.
The trade
Buy 1 $88 put · 45 days · $0.49
Sell 1 $92 put · 45 days · $1.13
Sell 1 $110 call · 45 days · $1.19
Buy 1 $116 call · 45 days · $0.45
Net credit $138
Max profit$138
Max loss−$462
Break-evens$90.62 · $111.38
Chance of profit67%
How it works
- You collect two credits. Max profit = total credit, if the stock ends between the short strikes.
- Max loss = width of one side minus the total credit (only one side can lose at expiry).
- Break-evens: short put − credit and short call + credit.
When to use it
- You expect the stock to stay in a range and implied volatility is high.
Managing the trade
- Short strikes near 0.16-0.20 delta give roughly a 60-70% chance of profit.
- Close at 50% of the credit; if one side is tested, roll the untested side closer to collect more.
Risks
- A big move either way. Wins are small and frequent, losses are larger and rarer, so sizing matters.