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Iron Condor Calculator \u2014 Income Strategy with Defined Risk
By Worldtickers ·
Use our free iron condor calculator to estimate max profit, max loss, breakeven, and adjustment levels. Enter your strikes, premiums, and contract size to see the full payoff.
This iron condor calculator \u2014 income strategy with defined risk tool focuses on use our free iron condor calculator to estimate max profit, max loss, breakeven, and adjustment levels. Enter your strikes, premiums, and contract size to see the full payoff. Use it to test option prices, strikes, premiums, expiration assumptions, and strategy outcomes so you can compare payoff scenarios, break-even levels, risk, and potential reward before placing an options trade.
Iron Condor Calculator
Iron Condor Calculator
Evaluate the risk/reward of an iron condor strategy.
What Is an Iron Condor?
An iron condor is a neutral options strategy that profits when a stock stays within a defined range. It combines two vertical credit spreads: a bear call spread (sell an out-of-the-money call and buy a higher out-of-the-money call) and a bull put spread (sell an out-of-the-money put and buy a lower out-of-the-money put). All four legs use the same expiration date and the same underlying stock.
You receive a net credit when entering the position because the premiums collected from the two short options exceed the premiums paid for the two long options. This net credit represents your maximum profit. The maximum loss is defined as the width of the wider spread minus the credit received, making the iron condor a defined-risk strategy suitable for income-oriented traders.
The iron condor is popular among options traders who want to generate consistent income from range-bound stocks. It works best in low-volatility environments or when you believe a stock is unlikely to make a large directional move within a specific time frame.
How to Use This Calculator
The calculator takes the strikes and premiums for all four legs and the number of contracts to produce a complete payoff analysis.
Lower Put Strike (Long Put)
Enter the strike price of the put you are buying. This is the lowest of the four strikes and acts as your downside protection. It defines the maximum loss on the put side. This put is the cheapest because it is the furthest out of the money.
Short Put Strike
Enter the strike price of the put you are selling. This is typically the second-lowest strike. The short put is where you want the stock to stay above at expiration. The premium you collect from selling this put is a key component of the net credit.
Short Call Strike
Enter the strike price of the call you are selling. This is typically the third strike. The short call is where you want the stock to stay below at expiration. The premium you collect from selling this call is the other key component of the net credit.
Upper Call Strike (Long Call)
Enter the strike price of the call you are buying. This is the highest of the four strikes and acts as your upside protection. It defines the maximum loss on the call side. This call is the cheapest because it is the furthest out of the money.
Number of Contracts
Enter how many iron condors you plan to trade. Each iron condor consists of all four legs. The calculator scales the output by the number of contracts.
Formula
The key formulas for an iron condor are:
Net Credit = (Short Put Premium + Short Call Premium) — (Long Put Premium + Long Call Premium)
This is the amount you receive to enter the position and represents your maximum profit per share.
Max Loss = Width of Wider Spread — Net Credit
The width of each spread is the difference between its strikes. If both spreads have the same width, subtract the credit from that width. If the spreads have different widths, use the wider one.
Max Profit = Net Credit
This occurs when the stock closes between the two short strikes at expiration, causing all four options to expire with minimal or zero value.
Upper Breakeven = Short Call Strike + Net Credit
The stock must stay below this price for the trade to be profitable on the call side.
Lower Breakeven = Short Put Strike — Net Credit
The stock must stay above this price for the trade to be profitable on the put side.
Examples
Example 1: Iron Condor on SPY
SPY is trading at $500. You sell the $490 put for $3.00 and buy the $480 put for $1.50 (put credit spread net credit $1.50). You sell the $510 call for $2.50 and buy the $520 call for $1.00 (call credit spread net credit $1.50). Your total net credit is $3.00 ($300 per condor). Max profit is $300. Max loss is ($510 — $490) — $3 = $17 per share, or $1,700 per condor. Upper breakeven is $513. Lower breakeven is $487. SPY must stay between $487 and $513 at expiration for the trade to be profitable.
Example 2: Narrow Range Iron Condor on AAPL
AAPL is trading at $150. You sell the $145 put for $2.00 and buy the $140 put for $1.00 (put spread credit $1.00). You sell the $155 call for $2.50 and buy the $160 call for $1.50 (call spread credit $1.00). Total credit is $2.00 ($200 per condor). Max profit is $200. Max loss is ($155 — $145) — $2 = $8 per share, or $800 per condor. Upper breakeven is $157. Lower breakeven is $143. This $10-wide condor on each side offers a higher credit but a narrower profit zone than a wider condor.
Example 3: Asymmetric Iron Condor
A stock is at $100. You sell the $95 put for $2.00 and buy the $90 put for $1.00 (put spread credit $1.00). You sell the $110 call for $1.50 and buy the $115 call for $0.75 (call spread credit $0.75). Total credit is $1.75 ($175 per condor). The put spread is $5 wide and the call spread is $5 wide, so max loss is $5 — $1.75 = $3.25 per share, or $325 per condor. Upper breakeven is $111.75. Lower breakeven is $93.25. The asymmetric premiums reflect the stock's implied volatility skew.
Tips
Sell Strikes at Your Probability Targets
Choose the short strikes based on your probability of profit. Selling the $490 and $510 calls/puts on SPY (approximately 1 standard deviation away) gives roughly a 68% probability of profit. Moving closer to the current price increases credit but decreases probability of success. Balance credit received against probability based on your risk tolerance.
Use 30-45 DTE for Optimal Time Decay
The sweet spot for iron condors is typically 30-45 days to expiration. This provides enough premium to make the trade worthwhile while allowing time decay to work in your favor. Shorter expirations have higher gamma risk (rapid loss potential from sharp moves), while longer expirations lock up capital for extended periods with diminishing returns.
Close at 50% of Max Profit
Many experienced iron condor traders close the position when it reaches 50% of maximum profit rather than holding to expiration. This locks in gains while freeing up capital and eliminating assignment risk. The remaining 50% of profit comes with increasing gamma risk as expiration approaches, making it generally not worth the additional risk to hold for the last bit of premium.
Set a Maximum Loss Threshold
Define your maximum acceptable loss before entering the trade (e.g., 2-3x the credit received) and stick to it. When the tested side is breached, avoid the temptation to keep adjusting and adding risk. Close the position at your predetermined loss limit and move on to the next opportunity. Discipline is the key to long-term success with iron condors.
FAQ
What is an iron condor?
An iron condor is a neutral options strategy that profits when a stock stays within a defined range. It combines a bear call spread (sell OTM call + buy higher OTM call) and a bull put spread (sell OTM put + buy lower OTM put) on the same stock with the same expiration. You receive a net credit for entering the position. The strategy has defined risk and defined reward, making it popular for income generation in range-bound markets.
When should I use an iron condor?
An iron condor works best when you expect a stock to stay within a specific price range over a certain time period. It is ideal for low-volatility environments or when you believe a stock is unlikely to make a large move. The strategy is commonly used by income-oriented traders who want to collect premium while accepting defined risk. It works well on stocks with stable price action or during periods of implied volatility contraction.
What is the maximum profit on an iron condor?
The maximum profit is the net credit received when you enter the position. This occurs when the stock price stays between the two short strikes at expiration, causing all four options to either expire worthless or with minimal value. For example, if you receive a total credit of $1.50 per share ($150 per contract), that is your maximum profit. The profit is realized when all options expire out of the money.
What is the maximum loss on an iron condor?
The maximum loss is the width of the wider spread minus the net credit received. For example, if you sell a call spread with a $5 width and a put spread with a $5 width, and receive a $1.50 credit, your maximum loss is $5 — $1.50 = $3.50 per share ($350 per contract). This occurs when the stock closes above the upper call strike or below the lower put strike at expiration.
What are the breakeven points for an iron condor?
An iron condor has two breakeven points. The upper breakeven is the short call strike plus the net credit received. The lower breakeven is the short put strike minus the net credit received. The stock must stay between these two breakeven points for the trade to be profitable at expiration. If the stock moves beyond either breakeven, the position starts to lose money.
What are adjustment levels in an iron condor?
Adjustment levels are the price points where you may want to modify your iron condor position to manage risk. When the stock approaches one of the short strikes, traders often roll the tested side further out of the money, close the tested side for a loss, or add an additional spread to widen the profit zone. Common adjustments include rolling the untested side closer for additional credit or closing the entire position when the loss reaches a predetermined threshold.
How does implied volatility affect an iron condor?
An iron condor is a net seller of options, so it benefits from declining implied volatility. When IV drops after you enter the position, the options lose value, which benefits the iron condor. This is why iron condors are typically entered when IV is high (expecting it to fall) and work best in low-volatility environments. Rising IV hurts the position, even if the stock price does not move.
What is the ideal expiration for an iron condor?
Most iron condor traders use 30-45 days to expiration. This timeframe provides enough premium to make the trade worthwhile while avoiding excessive gamma risk (the risk of rapid losses from sharp moves) that comes with shorter expirations. Some traders prefer 45-60 days for more time to adjust. Weekly expirations are riskier due to higher gamma exposure and narrower profit zones.
How should I manage risk on an iron condor?
Risk management is critical for iron condors. Set a maximum loss threshold (e.g., 2-3x the credit received) and close the position if it reaches that level. Avoid adjusting the tested side repeatedly, as this often increases risk without improving the odds. Consider closing the entire position at 50% of max profit to lock in gains. Diversify across different underlyings and avoid concentrating too much capital in a single trade.
Can I lose more than the maximum loss on an iron condor?
No. An iron condor has defined risk on both sides. The maximum loss is limited to the width of the wider spread minus the credit received, assuming the position is held to expiration. However, during the life of the trade, the mark-to-market loss can temporarily exceed the theoretical maximum if there is a gap move or extreme volatility before you can close the position.