Iron Condor Calculator

What Is an Iron Condor?

An iron condor is a four-leg options strategy that combines a short put spread (bull put spread) and a short call spread (bear call spread) on the same underlying stock with the same expiration date. The four legs, ordered by strike price, are:

• Long Put (K₁) — buy an OTM put at the lowest strike for downside protection
• Short Put (K₂) — sell an OTM put to collect premium
• Short Call (K₃) — sell an OTM call to collect premium
• Long Call (K₄) — buy an OTM call at the highest strike for upside protection

The strategy collects a net credit at entry and profits when the stock stays between the two short strikes at expiration. It is popular among traders who expect low volatility and range-bound price action.

Key Characteristics

• Max Profit: Net Credit received — occurs when the stock stays between K₂ and K₃ at expiration (all options expire worthless or OTM).
• Max Loss: Width of the wider spread minus net credit per share, × 100 × contracts. Occurs when stock moves beyond K₁ or K₄.
• Upper Breakeven: Short Call Strike (K₃) + Net Credit per share
• Lower Breakeven: Short Put Strike (K₂) - Net Credit per share
• Outlook: Neutral — expects the stock to stay in a range
• Cost: Net credit (receive premium at entry)
• Time Decay: Works in your favor — all four options lose time value, benefiting the net seller
• Risk: Defined — maximum loss is capped by the long wings

How to Read the P/L Chart

The solid blue line (At Expiration) shows the iron condor payoff: a trapezoid shape. Between the short strikes (K₂ and K₃), the P/L is flat at maximum profit (net credit). Moving outside the short strikes, the P/L declines linearly until reaching the long strikes (K₁ and K₄), where it flattens at maximum loss.

The dashed dark blue line (Today / T+0) represents the theoretical P/L at trade entry, computed using Black-Scholes for all four legs. The smooth curve shows how the combined position value changes with the stock price while time value remains in the options.

IV Mode vs. Premium Mode

IV Mode: Enter a single implied volatility, and the calculator uses Black-Scholes to estimate all four premiums. This mode also enables the “Today (T+0)” P/L curve on the chart. Note: the same IV is used for all legs, which is a simplification — in real markets, each strike may have a different implied volatility (volatility skew).

Premium Mode: Enter the exact premium for each of the four legs separately. Useful when you know the actual market prices. Only the expiration payoff curve is shown because IV is needed to compute theoretical values before expiration.

When to Use an Iron Condor

• When you expect the stock to stay in a range through expiration
• When implied volatility is elevated (richer premiums, more credit collected)
• After a volatility spike when you expect IV contraction (mean reversion)
• For income generation with defined risk — popular in monthly income strategies
• When you want market-neutral exposure without directional bias