Iron condor
TradingDefinition
Four-leg options strategy: short 1 OTM put, long 1 further-OTM put, short 1 OTM call, long 1 further-OTM call. Profits if the underlying stays between the short strikes. Defined-risk version of selling a strangle.
Popular with neutral, range-bound outlooks. Maximum profit = net premium received. Maximum loss = strike width − premium. The trade pays small wins frequently and produces occasional max losses — classic "picking up nickels in front of a steamroller" if managed sloppily.
Popular with neutral, range-bound outlooks. Maximum profit = net premium received. Maximum loss = strike width − premium. The trade pays small wins frequently and produces occasional max losses — classic "picking up nickels in front of a steamroller" if managed sloppily.
Example
AAPL at $180. Sell $170 put for $2, buy $165 put for $1, sell $190 call for $2, buy $195 call for $1. Net credit = $2. Max profit if AAPL closes between $170-$190. Max loss = $5 strike width − $2 premium = $3.