Iron Condor – The Option Strategy Desk Reference

Iron Condor

Strategy: Sell n OTM Calls, Expire 56 DTE

Buy n OTM Calls, Higher Strike, Same Expiry

Sell n OTM Puts, Same Expiry

Buy n OTM Puts, Lower Strike, Same Expiry

Example:

Price Chart: Neutral to slight downward price trend

Current IV%: 50%

IV Rank: 40 to 60

Trade: Sell n OTM call options; buy n OTM call options, higher strike; sell n OTM put options; buy n OTM put options, lower strike (all options at same expiration, 56 DTE).

Typical Strike Deltas:

Short Call 0.25

Long Call 2 or more strikes farther OTM than short call

Short Put 0.25

Long Put 2 or more strikes farther OTM than short put

Goals: The goal is to retain the premium collected when opened and for the vertical bull put and vertical bear call spreads to remain OTM through option expirations or until closed for a profit.

Manage: If the price of the underlying security remains within a narrow range, let the options expire worthless. If a price rally or drop occurs and threatens one of the vertical spreads, close the vulnerable position and retain the safe spread until it either expires worthless or can be closed for a reasonable profit.

Profit: Close when this strategy achieves a profit of 30 percent or more.

Loss: Close when a loss in premium value becomes 8 percent or less.