Iron Condor is a market neutral strategy that allows you to profit when the underlying price moves sideways. Iron Condors usually have a limited risk and a high probability of success.
The Iron Condor is a combination of a bull put spread and a bear call spread. The basic construction is:
- Sell 1 OTM Put
- Buy 1 OTM Put (Lower Strike)
- Sell 1 OTM Call
- Buy 1 OTM Call (Higher Strike)
All options expire at the same month. The distance is usually the same between the short and the long legs of the calls and the puts.
There are few variations of iron condors, here is one of them:
Trade Iron Condors Like Never Before