Condors And Iron Condors

A condor is an options position built from four strikes that pays off most when the underlying finishes between the two middle strikes and loses value the further price strays outside that range — a bet on low realized movement, like a wider, flatter-topped butterfly. A classic (call) condor buys a call at the lowest strike, sells calls at the two middle strikes, and buys a call at the highest strike, all same expiry.

The iron condor achieves the identical payoff shape using a different combination of legs: it sells an out-of-the-money put spread below the current price and an out-of-the-money call spread above it — so it's a mix of puts and calls rather than four calls (or four puts). Because it's constructed from credit spreads, the iron condor is opened for a net credit and is the more commonly traded version, since it ties up less margin for retail-sized accounts than the equivalent all-calls condor.

For example, with a stock at $100, an iron condor might sell the $95 put and buy the $90 put (a put credit spread), while selling the $105 call and buying the $110 call (a call credit spread). Maximum profit is the net credit received, realized if the stock finishes between $95 and $105 at expiry; maximum loss is capped at the width of either spread minus the credit received, if the stock breaks past $90 or $110.

Both versions have the same payoff diagram — a flat-topped tent — the difference is purely which legs are calls versus puts, which affects margin, assignment risk, and typically the net premium direction.