Iron Condors
What It Is
An iron condor is an options strategy that profits from low volatility by selling both a call spread and a put spread around the current price.
Why It Matters
It generates income when the underlying asset trades within a defined range.
How It Works
- Sell an out‑of‑the‑money call spread
- Sell an out‑of‑the‑money put spread
- Collect premiums from both spreads
- Maximum profit occurs if price stays between the short strikes
Key Components
- Defined risk
- Range‑bound expectation
- Four‑leg structure
- Premium collection
Example
If a stock trades at $100, an iron condor might involve selling a $105/110 call spread and a $95/90 put spread.
Key Takeaways
- Profits from low volatility.
- Risk and reward are capped.
- Ideal for stable, sideways markets.