How do you calculate iron condor max profit and max loss?

Maximum profit equals the net credit received when opening the trade, multiplied by 100 per contract. Maximum loss equals the width of the wider spread minus the net credit, also multiplied by 100. If both spreads are $5 wide and you collect $1.40, max profit is $140 and max loss is $360.

Where are the breakeven points on an iron condor?

There are two. The lower breakeven is the short put strike minus the net credit. The upper breakeven is the short call strike plus the net credit. Between those two prices the trade finishes profitable at expiration.

Is an iron condor better than a short strangle?

An iron condor caps the loss on both sides by buying protective wings, while a short strangle has unlimited risk on the upside and large risk on the downside. The strangle collects more credit and requires far more margin. Most retail traders prefer the condor because the worst case is known in advance.

What delta should I use for iron condor strikes?

A common guideline is to sell the short put and short call around 15 to 20 delta, which places them roughly one standard deviation from the stock price. Lower deltas give a wider profit range but a smaller credit; higher deltas collect more but get tested more often.

When should I close an iron condor?

Many traders take profit once the position has earned 50 percent of the credit, and cut losses at around two times the credit received. Closing at 21 days to expiration is another popular rule, because gamma risk rises sharply in the last three weeks.

Can I lose more than the max loss on an iron condor?

Not at expiration, because the long wings define the risk. The exception is early assignment of a short option combined with a gap in the stock before you can close the other legs, which can produce a small additional loss. Keeping enough cash to handle assignment avoids most of that risk.

Iron Condor Calculator & strategy guide

Iron Condors & ButterfliesIntermediateNeutralDefined risk

Sell a call spread and a put spread to profit from low volatility with defined risk.

Payoff at expiration

Worked example: XYZ at $100, 45 days to expiration

Profit Loss Breakeven

Max profit: +$140; Net credit received
Max loss: −$360; Wing width − net credit
Breakevens: $88.60 & $111.40; Short put − credit · Short call + credit

The trade · net credit $1.40 a share ($140)

Buy $85 put · $0.50
Sell $90 put · $1.20
Sell $110 call · $1.10
Buy $115 call · $0.40

Price this iron condor on SPY with today's chain — then change the ticker, strikes and expiry.

Open in Build

What is an iron condor?

An iron condor is a four-leg, market-neutral options strategy built from two credit spreads on the same underlying and expiration: a bull put spread below the current price and a bear call spread above it. You sell an out-of-the-money put and an out-of-the-money call, then buy a further out-of-the-money put and call as protective wings. The position is opened for a net credit, and that credit is the most you can make.

The trade profits when the stock stays between the two short strikes through expiration, letting all four options expire worthless. Time decay works in your favor every day the stock stays inside the range, and a drop in implied volatility helps too, because it shrinks the value of the options you sold faster than the wings you bought.

The payoff diagram is a flat plateau between the short strikes, sloping down to a flat floor beyond each long strike. The long wings cap the loss on either side, which is what makes the iron condor a defined-risk alternative to a short strangle. The trade-off is that the wings cost premium, so the credit is smaller than the strangle would collect.

Setup

Leg	Strike	Expiry
Buy 1 put	3 strikes OTM	Near
Sell 1 put	2 strikes OTM	Near
Sell 1 call	2 strikes OTM	Near
Buy 1 call	3 strikes OTM	Near

Iron Condor example

XYZ trades at $100 with 45 days to expiration. You sell the $90 put for $1.20 and buy the $85 put for $0.50, then sell the $110 call for $1.10 and buy the $115 call for $0.40. The net credit is $1.40 per share, or $140 per iron condor. Both spreads are $5 wide.

Stock at expiration	Result
$100 (unchanged)	All four options expire worthless. You keep the full $140 credit, the maximum profit.
$111.40 or $88.60	Breakeven. The short call (or put) is $1.40 in the money, exactly offsetting the credit. P&L is $0.
$112	The $110 call is $2.00 in the money and the $115 call is still worthless. Loss is $200 minus the $140 credit, or −$60.
$120 or $80	One spread is fully in the money. Loss is the $5 width minus the $1.40 credit, or −$360, the maximum loss.

Maximum profit is the $140 credit if XYZ finishes between $90 and $110. Maximum loss is $360 ($500 spread width minus $140 credit) if it finishes below $85 or above $115. Breakevens sit at $88.60 and $111.40, giving a $22.80-wide profit zone.

When to use an iron condor

You expect the stock to trade sideways or within a predictable range until expiration.
Implied volatility is elevated relative to its recent history, so option premiums are rich and likely to contract.
You want to sell premium but need a hard cap on loss for risk management or margin reasons.
There is no earnings report or other known catalyst inside the expiration window.
Typical entries use 30 to 60 days to expiration and short strikes around the 15 to 20 delta, which corresponds to roughly a 65 to 75 percent probability of expiring out of the money.

Risks to understand

A sharp move in either direction can push the stock through a short strike quickly, and losses accelerate as you approach the long wing.
The reward-to-risk ratio is unfavorable by design: in the example you risk $360 to make $140, so a high win rate is required to stay profitable over many trades.
A rise in implied volatility inflates the value of the short options, producing a mark-to-market loss even if the stock has not moved.
Short options that finish in the money can be assigned early, especially puts near ex-dividend dates, leaving you with a stock position you did not plan for.
Wide bid-ask spreads on four legs add up. On illiquid underlyings the slippage alone can consume a large share of the credit.

Managing the trade

Many traders close the position when they have captured 50 percent of the maximum credit rather than holding to expiration, which removes gamma risk in the final weeks.
If the stock approaches one short strike, the untested spread can be rolled closer to the stock to collect more credit and shift the breakeven.
The tested spread can be rolled out to a later expiration, ideally for a credit, to give the trade more time to recover.
Set a mental or hard stop at one and a half to two times the credit received. Letting a condor run to maximum loss wipes out several winning trades.
Avoid holding through the final few days unless the stock is comfortably inside the range; pin risk near a short strike makes the outcome a coin flip.

Iron Condor FAQs

How do you calculate iron condor max profit and max loss?: Maximum profit equals the net credit received when opening the trade, multiplied by 100 per contract. Maximum loss equals the width of the wider spread minus the net credit, also multiplied by 100. If both spreads are $5 wide and you collect $1.40, max profit is $140 and max loss is $360.
Where are the breakeven points on an iron condor?: There are two. The lower breakeven is the short put strike minus the net credit. The upper breakeven is the short call strike plus the net credit. Between those two prices the trade finishes profitable at expiration.
Is an iron condor better than a short strangle?: An iron condor caps the loss on both sides by buying protective wings, while a short strangle has unlimited risk on the upside and large risk on the downside. The strangle collects more credit and requires far more margin. Most retail traders prefer the condor because the worst case is known in advance.
What delta should I use for iron condor strikes?: A common guideline is to sell the short put and short call around 15 to 20 delta, which places them roughly one standard deviation from the stock price. Lower deltas give a wider profit range but a smaller credit; higher deltas collect more but get tested more often.
When should I close an iron condor?: Many traders take profit once the position has earned 50 percent of the credit, and cut losses at around two times the credit received. Closing at 21 days to expiration is another popular rule, because gamma risk rises sharply in the last three weeks.
Can I lose more than the max loss on an iron condor?: Not at expiration, because the long wings define the risk. The exception is early assignment of a short option combined with a gap in the stock before you can close the other legs, which can produce a small additional loss. Keeping enough cash to handle assignment avoids most of that risk.