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What an iron condor is and how to build one — a complete guide. An options selling strategy for range-bound markets with limited risk.
Published by The Retail Trader · AUG 08, 2026 · Features
What an iron condor is and how to build one — a complete guide. An options selling strategy for range-bound markets with limited risk.
An Iron Condor is an options selling strategy that works when the market is range-bound — it neither goes up too much nor falls too much.
Simple definition: > Iron Condor = Sell OTM Call + Buy OTM Call (higher) + Sell OTM Put + Buy OTM Put (lower)
This is a neutral strategy — you don't need a market direction. The market just has to stay within a range.
Example: Nifty at 20,000
Keep these four points in mind:
• Sell OTM Call — 20,300 CE @ ₹80 (you receive premium)
• Buy OTM Call — 20,500 CE @ ₹30 (protection)
• Sell OTM Put — 19,700 Put @ ₹70 (you receive premium)
• Buy OTM Put — 19,500 Put @ ₹25 (protection)
Profit/Loss Calculation:
• Net Premium Received:
• Call side: ₹80 - ₹30 = ₹50
• Put side: ₹70 - ₹25 = ₹45
• Total Credit: ₹95 per share
• Lot size: 25
• Total Credit: ₹95 × 25 = ₹2,375
• Maximum Profit: ₹2,375 (if Nifty stays between 19,700-20,300)
• Maximum Loss: ₹2,375 - (₹200 × 25) = ₹2,625 (if Nifty goes beyond 19,500 or 20,500)
• Breakeven: 19,605 (Put strike - premium) to 20,395 (Call strike + premium)
Visual:
• Profit
• ↑
• │ │ MAX PROFIT │
• │ │ ₹2,375 │
• ──┼───────────────────────→ Nifty Price
• │ 19,500 19,700 20,300 20,500
• │ ↑ ↑
• │ Max Loss Max Loss
Rule 1: Identify the Range:
• Identify the expected range of Nifty/Bank Nifty
• Support level = Sell Put strike
• Resistance level = Sell Call strike
• Buffer: Keep it slightly outside (200-300 points)
Rule 2: Premium Collection:
• Net credit should be at least 1/3 of the width
• Example: 200-point wide spread → minimum ₹65 credit
Rule 3: Probability Check:
• OTM strikes should be 1 standard deviation outside
• ~70% probability of profit
Rule 4: Expiry Timing:
• Best entry: 15-20 days before expiry
• Worst entry: 5 days before expiry (gamma risk)
• Best exit: 50% profit achieved or 7 days before expiry
Keep these five points in mind:
• Profit zone — Iron Condor: Wide, Iron Butterfly: Narrow, Credit Spread: One-sided
• Max profit — Iron Condor: Lower, Iron Butterfly: Higher, Credit Spread: Medium
• Max loss — Iron Condor: Limited, Iron Butterfly: Limited, Credit Spread: Limited
• Best for — Iron Condor: Range-bound, Iron Butterfly: Very tight range, Credit Spread: Directional bias
• Complexity — Iron Condor: Medium, Iron Butterfly: Medium, Credit Spread: Low
If Nifty is moving toward 20,300 (Call side tested):
• Roll the sold Call spread upward (20,400/20,600)
• You will receive additional credit
• Risk increases slightly
If Nifty breaks 20,300:
• Close the tested Call spread (book the loss)
• Leave the Put spread open (profit)
• Check the net P&L
If the market range is narrowing:
• Sell ATM Call + ATM Put (instead of OTM)
• Buy further OTM Call + Put (protection)
• Higher premium, tighter range
Nifty Iron Condor:
• Best days: Monday/Tuesday (for weekly expiry)
• Best VIX: 13-18 (normal volatility)
• Avoid: Budget day, election day, RBI policy day
• Lot size: 25
• Capital required: ~₹1,50,000 (margin)
Bank Nifty Iron Condor:
• More premium but more risk
• Wider spreads needed (500-800 points)
• Lot size: 15
• Capital required: ~₹2,00,000 (margin)
Weekly vs Monthly Expiry:
• Weekly — Premium: Low, Risk: High (gamma), Best for: Experienced
• Monthly — Premium: Higher, Risk: Lower, Best for: Beginners
Recommendation: Start with monthly expiry. Weekly expiry is very fast.
"Nifty will stay within 19,900-20,100" — a 200-point range is too small. Take a range of at least 400-600 points.
Budget, election, RBI policy — these events can cause very big moves. Don't set up an Iron Condor on event days.
An Iron Condor is not set-and-forget. If the market moves, adjust — roll, close, or convert.
Don't let the maximum loss happen. Close at a 50% loss. Capital preservation is key.
At VIX < 12 you get very little premium. The risk/reward is not good. Sell at VIX 15+.
Keep these points in mind:
• 📌 IRON CONDOR QUICK REFERENCE
• SETUP:
• 1. Sell OTM Call (outside resistance)
• 2. Buy OTM Call (further OTM — protection)
• 3. Sell OTM Put (outside support)
• 4. Buy OTM Put (further OTM — protection)
• PROFIT:
• ✅ Market stays in range → you get the full premium
• ✅ Time decay (theta) is your FRIEND
• ✅ Close at 50% profit (don't be greedy)
• LOSS:
• ❌ Market goes out of range → limited loss
• ❌ Maximum loss = Spread width - Premium received
• ENTRY RULES:
• 📊 15-20 days before expiry
• 📊 VIX 15+ (sufficient premium)
• 📊 No events in the period
• 📊 Range 400-600 points minimum
• EXIT RULES:
• 📊 50% profit → Close
• 📊 50% loss → Close (don't hold for full loss)
• 📊 7 days before expiry → Close (gamma risk)
• 📊 Event approaching → Close before event
• ADJUSTMENTS:
• 🔧 Roll tested side → more credit
• 🔧 Close tested side → limit loss
• 🔧 Convert to butterfly → tighter range
Keep these five points in mind:
• What Are Option Greeks?
• What Is Implied Volatility?
• How to Read an Option Chain?
• Option Buyer Vs Seller Math
• Basics of Spread Strategies
The Retail Trader — educational market analysis. Not investment advice.
This article is for educational purposes only — it contains no buy or sell recommendation, no claim of guaranteed returns, and no advisory. Rules, rates and mechanics change from time to time at the exchanges, SEBI and RBI, so verify every number yourself with your broker or an official source.