Iron Condors: High-Probability Income Strategy
Iron condors are the go-to strategy for traders who want to profit from a stock going nowhere. Collect premium from both sides while defining your max risk upfront. Here's how to build one correctly.
What Is an Iron Condor?
An iron condor combines a bull put spread and a bear call spread on the same underlying, at the same expiration. You collect premium from both sides and profit if the stock stays between your two short strikes.
Example: SPY is at $680. You sell a $660 put, buy a $655 put, sell a $700 call, buy a $705 call — all at the same expiration. You collect a net credit. If SPY stays between $660 and $700 at expiration, all four options expire worthless and you keep the full credit.
Best Setups
- Underlying: Liquid ETFs (SPY, QQQ, IWM) or large-cap stocks with active options
- IV Rank > 30: Iron condors need elevated implied volatility to generate worth collecting
- 30-45 DTE: Same sweet spot as covered calls — time decay works in your favor
- Delta ~15-20 on short strikes: Keeps probability of profit above 70%
Risk Management
Close at 50% max profit or when the short strike is breached. Never let an iron condor expire in contested territory.
Best Brokers for Iron Condors
Tastytrade's platform is built for multi-leg strategies — single-order entry, free-to-close legs, best P&L visualization. Interactive Brokers is the runner-up for complex spreads. See best options brokers.
Tastytrade is built for options traders — the best platform for covered calls, cash-secured puts, and spreads.
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