← Back to Options Strategy Guide

A four-leg options strategy that collects premium by betting the underlying stays inside a range through expiry. Both maximum profit and maximum loss are fixed the moment you place the trade.

Also known as a neutral options strategy or a range-bound options trading strategy, the Iron Condor is one of the most widely used defined-risk strategies for Nifty and Bank Nifty options on the NSE.

An Iron Condor combines two credit spreads into one position: a bear call spread above the current price, and a bull put spread below it. You sell the closer-to-the-money option on each side and buy a further out-of-the-money option on the same side to cap your risk. The result is a position that profits from time decay and low movement, with both the best-case and worst-case outcome known in advance.

The two short legs (the ones you sell) are what generate the premium you collect upfront. The two long legs (the ones you buy) exist purely to cap how much you can lose if the underlying makes a big move — without them, this would be a Short Strangle instead, with theoretically unlimited risk on both sides.

An Iron Condor options strategy works by collecting a net credit upfront and then relying on time decay (theta) to do the work for you. Every day that passes with the underlying inside your range, the options you're short lose a little value — which is money in your pocket, since you're the one who sold them. You don't need the underlying to move in your favor; you just need it to not move too much.

To understand how the payoff actually behaves, it helps to split the price axis into five zones at expiry:

1. Below the long put strike — maximum loss, fully capped. The put spread is worth its full width; the call spread expires worthless.
2. Between the long put and short put strikes — loss shrinks as price rises, moving from max loss toward breakeven.
3. Between the two short strikes (the profit zone) — both spreads expire worthless. This is where maximum profit is realized, and it's flat across the whole zone — price can move anywhere inside it without changing the outcome.
4. Between the short call and long call strikes — profit shrinks as price rises further, moving from max profit back down toward breakeven and then loss.
5. Above the long call strike — maximum loss again, fully capped, mirroring zone 1 on the other side.

The two breakeven points sit inside zones 2 and 4 — the exact prices where cumulative profit crosses zero. Everything between the two breakevens is profitable; everything beyond either one loses money, up to the capped maximum.

An Iron Condor fits a range-bound, low-conviction outlook — you don't expect a big move in either direction before expiry, and you'd rather collect time decay than guess a direction. It's commonly used when implied volatility is elevated relative to how much the underlying has actually been moving, since richer premium widens the range where you can still profit. It is not a fit if you have any real directional view — a Bull Call Spread or Bear Put Spread expresses that far more directly.

Max profit is realized if the underlying finishes between the two short strikes at expiry — both spreads expire worthless, and you keep the full credit. Max loss is realized if the underlying finishes beyond either long strike — one spread reaches its full width against you, offset only by the credit you originally collected. Between the two breakevens, the position is profitable; outside them, it loses money, up to the capped maximum.

Here's exactly how to set up and read an Iron Condor, walked through step by step with real numbers. Suppose Nifty is trading at 24,000 with a weekly expiry coming up, and lot size is 65.

1. Confirm the setup. You expect Nifty to stay roughly between 23,600 and 24,400 through expiry — no strong view either way, just a range.
2. Sell the near out-of-the-money put at the 23,600 strike, collecting a premium of 45.
3. Buy a further out-of-the-money put at the 23,400 strike for 22, to cap the downside risk on this side.
4. Sell the near out-of-the-money call at the 24,400 strike, collecting a premium of 48.
5. Buy a further out-of-the-money call at the 24,600 strike for 24, to cap the upside risk.
6. Calculate the net credit: (45−22) from the put side + (48−24) from the call side = 47 points, or ₹3,055 at this lot size. This is your maximum possible profit, credited to your account the moment the trade is placed.
7. Calculate the max loss: both spreads are 200 points wide, so max loss is (200 − 47) × 65 = ₹9,945, the same on either side.
8. Calculate the breakevens: 23,600 − 47 = 23,553 on the downside, and 24,400 + 47 = 24,447 on the upside.
9. Hold the position. No action needed while Nifty stays inside the range — time decay works in your favor every day that passes.
10. See how it resolves at expiry:
    • Nifty finishes between 23,600 and 24,400 → all four legs expire worthless, you keep the full ₹3,055 credit.
    • Nifty finishes between 23,553 and 23,600, or between 24,400 and 24,447 → still profitable, just less than the maximum.
    • Nifty finishes beyond either breakeven, up to the long strikes → a growing loss, capped at ₹9,945 once it passes 23,400 or 24,600.

Quick reference for the same trade:

Based on the worked example above. Move the cursor over the chart to see profit/loss at any price.

• Max loss can exceed max profit. In this example, the most you can lose (₹9,945) is more than three times the most you can gain (₹3,055) — a common shape for this strategy. A high win rate doesn't automatically mean a good trade if the occasional loss is large enough to offset many wins.
• A sharp move in either direction hurts. Unlike a directional trade, an Iron Condor has no upside from being "right" about direction — it only benefits from the underlying staying put.
• Index options on NSE are typically European-style and cash-settled — they can only be exercised at expiry, not early, which removes the early-assignment risk that applies to American-style stock options. This is a genuine advantage of running this strategy on an index like Nifty or Bank Nifty rather than individual stock options.
• Liquidity matters at the far strikes. The long (protective) legs are further out-of-the-money and can have wider bid-ask spreads, especially outside the most liquid weekly/monthly expiries — check the actual spread before assuming the numbers above translate exactly to a live fill.