Iron Condor Calculator
The iron condor is a market-neutral options strategy that combines a bull put spread with a bear call spread to create a position with limited risk and defined profit potential. It profits when the underlying asset stays within a specific price range between the short strikes during the life of the options.
When to use this calculator:
- When you expect the underlying asset to trade within a specific range
- When market volatility is high and you expect it to decrease
- When you want to generate income with a defined risk
- When you have a neutral outlook on the market or specific stock
- When you want to benefit from time decay across multiple option strikes
Iron Condor Calculator
Calculate max profit, loss, and break-even points for iron condor strategies
Put Wing
Call Wing
Understanding Iron Condors
Strategy Structure
An iron condor consists of four different option contracts with the same expiration date:
- Put Wing:
- • Buy 1 put at a lower strike price (long put)
- • Sell 1 put at a higher strike price (short put)
- Call Wing:
- • Sell 1 call at a lower strike price (short call)
- • Buy 1 call at a higher strike price (long call)
The position is typically established for a net credit, with maximum profit achieved when all options expire worthless.
Calculator Fields
- Stock Price:
The current market price of the underlying security.
- Short Put Strike:
The strike price of the put option you're selling.
- Long Put Strike:
The strike price of the put option you're buying (lower than short put).
- Short Call Strike:
The strike price of the call option you're selling.
- Long Call Strike:
The strike price of the call option you're buying (higher than short call).
- Premiums:
The cost/credit per share for each option contract.
Results Explained
- Max Profit:
The maximum amount you can gain from the strategy, which is the net credit received when opening the position.
- Max Loss:
The maximum amount you can lose, which is the difference between strikes in either wing minus the net credit received.
- Break-even Points:
The stock prices at which the strategy will neither make nor lose money at expiration.
- Probability of Profit:
An estimate of the likelihood that the strategy will be profitable at expiration.
- Put Wing Width:
The difference between the short put and long put strikes.
- Call Wing Width:
The difference between the short call and long call strikes.
Strategy Advantages
- Defined risk and reward parameters
- Profits from time decay (theta positive)
- Can be profitable in sideways markets
- Benefits from decreasing implied volatility
- Generally has a high probability of profit
- Flexible strategy that can be adjusted
- Can be set up with varied widths between strikes
- Lower margin requirements than naked options
Optimal Setup Conditions
Width Considerations
- Wider wings increase max loss but provide more room for price movement
- Narrower wings reduce max loss but increase risk of breaching short strikes
- Ideal width depends on the stock's volatility and your risk tolerance
- Consider historical price movements when setting wing widths
Strike Selection
- Short strikes should be outside the expected trading range
- Consider using delta as a guide (e.g., 0.30 delta or lower for short options)
- The distance between short strikes (the body of the condor) determines profit zone
- Balance between premium collection and probability of profit
Important Risk Considerations
- Early assignment risk exists, particularly when short options go in-the-money.
- Significant market moves can breach your short strikes, leading to potential losses.
- Consider adjusting the position if the stock price approaches or breaches your short strikes.
- Commission costs can impact profitability, especially when closing the position early.
- This calculator shows theoretical values at expiration and doesn't account for early management scenarios.