strategies
Iron Condor P&L
The classic neutral income strategy: sell a put spread and a call spread simultaneously. Profit if the stock stays within a range.
Formula
Max Profit = Total Credit Received Max Loss = Wider Wing Width - Total Credit BE_low = Short Put - Credit BE_high = Short Call + Credit
Variables
- Total Credit
- Sum of put spread credit + call spread credit
- Wing Width
- Width of each spread (usually equal)
- Short Put
- Lower short strike (downside)
- Short Call
- Upper short strike (upside)
Worked Example
Inputs
- Stock
- $100
- Put spread
- 90/85p for $0.80 credit
- Call spread
- 110/115c for $0.70 credit
Calculation Steps
- 1
Total Credit = $0.80 + $0.70 = $1.50 - 2
Wing Width = $5 (both sides) - 3
Max Loss = $5.00 - $1.50 = $3.50 - 4
BE low = $90 - $1.50 = $88.50 - 5
BE high = $110 + $1.50 = $111.50 - 6
Profit zone: $88.50 — $111.50
Result: Max Profit $1.50 / Max Loss $3.50 / Range: $88.50–$111.50
Intuition
Iron condors work best in high IVR environments on non-trending stocks. Target 30-45 DTE, manage at 50% of max profit or 2× credit loss. The key risk is a sustained directional move that blows through one side.