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Long iron condor
A long iron condor is a four-legged, defined-risk, volatility-focused option strategy. You sell outer wings and buy inner spreads, paying a net debit. The chart below shows a long iron condor with short put strike 90 at $1, long put strike 95 at $4, long call strike 105 at $4, short call strike 110 at $1, and the profit/loss diagram.
Greeks and this strategy
| Greek | How it behaves |
|---|---|
| Delta | Near zero in the profit zone between inner strikes. Directional bias builds if price approaches wings. |
| Theta | Negative when long inner spreads dominate; time decay hurts unless price or volatility movement offsets it. |
| Gamma | Mixed across four legs; exposure rises near inner strikes as expiration approaches. |
| Vega | Positive. Gains from rising implied volatility; hurts on IV collapse. |
Overview of long iron condor
A long iron condor combines a bull put spread and a bear call spread with a gap between the short strikes. The outer short strikes are further out of the money than the long inner strikes. Maximum loss is limited to the net debit paid. Maximum profit occurs if the stock closes between the inner long strikes at expiration. Each contract represents 100 shares of the underlying (relevant for the US market).
Market outlook for long iron condor
Traders open a long iron condor when they expect the underlying to stay within the inner profit zone and implied volatility to rise. It is the debit counterpart to the short iron condor and costs less than buying separate vertical spreads because the outer short wings reduce the net debit.
How to open a long iron condor
Open the position by selling the outer put and call while buying the inner put and call spreads. All four orders are typically placed as a single complex order. Wing width and the distance between inner strikes determine the net debit and profit zone.
Profit/loss diagram for a long iron condor
Maximum loss equals the net debit paid and occurs if the stock closes at or beyond either outer wing at expiration. Maximum profit equals the inner spread width minus the net debit and occurs if the stock closes between the inner long strikes. For example, a $5.00-wide inner zone with a $6.00 debit and $1.00 credit from outer wings creates a net $5.00 debit. Maximum profit is $500 per contract if the stock closes between $95 and $105.
How to enter a long iron condor
Submit a long iron condor order to your broker, specifying all four strikes, expiration, and a limit price for the net debit. The order is filled when the market accepts your limit debit or better. Opening the position debits your account for the net premium plus commissions.
How to exit a long iron condor
Close the position before expiration by reversing all four legs as a single complex order. If the position value exceeds the entry debit, you realize a profit. At expiration, the position resolves based on where the stock closes relative to all four strikes.
The impact of time decay on a long iron condor
Time decay affects the long inner spreads and short outer wings in opposite ways. When the stock remains inside the profit zone, extrinsic value declines across all legs. The net impact depends on how close the stock stays to the center of the structure through expiration.