Definition of Iron Condor

What is the definition of the term "Iron Condor"? What is meant by the term "Iron Condor"?

In the world of options trading, an "Iron Condor" is a popular strategy used by traders who expect minimal movement in the underlying stock or index. It involves four different options contracts - two puts and two calls - all with the same expiration date but different strike prices.

Here's how it works:

You sell a lower-strike put and buy an even lower-strike put (creating a bull put spread).

Simultaneously, you sell a higher-strike call and buy an even higher-strike call (creating a bear call spread).

Both spreads are out-of-the-money, and the goal is for the underlying asset to stay between the two short strike prices through expiration. If that happens, all four options expire worthless, and the trader pockets the net credit received when opening the position.

Iron Condors are considered neutral, defined-risk strategies. They're most commonly used in low-volatility environments or when a trader believes a stock will trade sideways in a specific range.

The maximum profit is the net premium received. The maximum loss is capped and occurs if the price breaches either wing of the condor.

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