Iron condor strategy — how it works
An iron condor profits when the market stays in a range. Learn the four legs, the payoff, and how to build one on Nifty Paper Trade.
An iron condor is a range-bound, defined-risk strategy: you profit when the market stays between two levels. It's built from four legs — a sold call spread above the price and a sold put spread below — so it earns premium if the underlying goes nowhere.
The four legs
- Sell an OTM call, Buy a further OTM call (caps upside risk)
- Sell an OTM put, Buy a further OTM put (caps downside risk)
Payoff
- Max profit: the net premium received — if price stays between the sold strikes at expiry.
- Max loss: defined and limited (the spread width minus premium) — the bought wings cap it.
- Best in low-volatility, sideways markets.
How to build it
- Open the Strategy Builder.
- Add the four legs (or start from the iron condor template).
- Check the payoff (a wide flat profit zone), then deploy.
Because selling options carries risk, the bought wings act as a hedge that caps your loss and reduces margin.
FAQ
When does an iron condor make money?
When the underlying stays between your sold call and sold put strikes through expiry.
Is my risk limited?
Yes — the bought wings cap the maximum loss, unlike a naked short option.
What market suits it?
Quiet, range-bound conditions with little expected movement.