The Iron Condor is a limited-risk, limited-reward, neutral, cash flow options strategy designed to have high probability of profit when the underlying security is range-bound within a certain price level. This strategy results in a net credit and is considered a Theta strategy as it benefits from time decay.
The construction of an Iron Condor requires the trader to buy and sell four options contracts, two puts and two calls, with four different strike prices, all with the same expiration date and same underlying security. The Iron Condor is made of a Bull Put Spread (bullish options strategy) and a Bear Call Spread (bearish options strategy) traded at the same time.
Iron Condor = Bull Put Spread + Bear Call Spread
Risk Graph
