Stock Market · Option Strategies

Iron condor

The iron condor is a short strangle with wings. You add a long call above and a long put below to cap your maximum loss. It's the most popular multi-leg options strategy among retail premium sellers.

Construction

Example: Nifty at 22,000.

• Sell 22,300 call @ ₹130
• Buy 22,600 call @ ₹50 (hedge)
• Sell 21,700 put @ ₹120
• Buy 21,400 put @ ₹45 (hedge)
• Net credit: (130 + 120) − (50 + 45) = ₹155

Payoff

• Maximum profit: ₹155 × 75 = ₹11,625 (if Nifty stays between 21,700-22,300)
• Maximum loss: (300 spread − 155 credit) × 75 = ₹10,875
• Upper breakeven: 22,300 + 155 = 22,455
• Lower breakeven: 21,700 − 155 = 21,545

> Unlike the naked strangle, you know EXACTLY how much you can lose. This is the critical advantage.

Why iron condors dominate retail options income strategies

1. Defined risk. Brokers require less margin than naked strangles.

2. Theta decay. You earn time value as each day passes.

3. Probability edge. Statistically, Nifty stays in range ~60-65% of weeks.

When it breaks down

A trend day, when markets move in one direction all day, kills the condor. The short call or short put goes deep ITM. Exit before the position reaches max loss.

Iron condorshort strangle + wings. Smaller premium, limited loss, defined risk.

Takeaway. Iron condor = sell OTM call + sell OTM put + buy further OTM call + buy further OTM put. Defined risk, theta friendly, profits from non-movement. The most practical income strategy for disciplined traders.