Four legs on one expiry: a put spread sold below the market and a call spread sold above it. Two credits go in and both are kept if the underlying finishes between the short strikes, so this is a position on a range rather than on a direction. The long wings are what convert two obligations with no natural limit into a loss you can size in advance. Its failure mode is slow and then sudden — a long run of small gains interrupted by one move straight through a wing. Set the four strikes here and read the profitable band against the probability distribution drawn beside it.
Four legs, two verticals, usually filled as one combined order — most platforms treat 'iron condor' as its own order type rather than four separate legs, which is what makes the execution practical. The two short strikes are the entire decision; the long wings exist only to define the risk and are usually placed at a fixed width rather than chosen independently. Because it is a net-credit, defined-risk position, margin is set by the wider wing minus the total credit, not by the sum of both wings.
Margin is set by the wider wing minus the total credit, so widening one wing without widening the other raises the buying power required without raising the credit collected — check both together, not just the credit, when comparing two condors on the same underlying. Many traders size a condor so the credit is a fixed fraction of the maximum loss, commonly a third or better, rather than sizing purely by contract count. Rolling the untested side to collect additional credit after the market has moved is a common adjustment; it changes both breakevens and should be planned before the position is opened, not improvised after.
Common mistake. The common mistake is widening the short strikes for a higher win rate without checking that the resulting credit still compensates for the wider wing's now-larger maximum loss.
| # | Action | Instrument | Strike |
|---|---|---|---|
| 1 | Buy | Put | 545 |
| 2 | Sell | Put | 555 |
| 3 | Sell | Call | 605 |
| 4 | Buy | Call | 615 |
Computed from the same strikes and net premium as the worked example above — not a simulation, the closed-form payoff evaluated at each price.
| SPY at expiry | P&L |
|---|---|
| 520 | -$710.00 |
| 545 | -$710.00 |
| 580 | $290.00 |
| 605 | $290.00 |
| 615 | -$710.00 |
| 640 | -$710.00 |
| Strategy | Market view | Opened for | Legs vs. this one |
|---|---|---|---|
| Iron Butterfly | Neutral — pinned | Credit | -1 |
| Long Strangle | Volatility — direction-agnostic | Debit | -2 |
| Bull Put Spread | Bullish to neutral — income | Credit | -2 |
| Call Condor | Neutral — range-bound | Debit | same |