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By Options AI Screener · Last updated 2026-10-12 · 8 min read
An iron condor is four legs that collapse into one simple idea: you are being paid for the stock staying inside a range. It collects two credits, it defines its own worst case, and it has the highest probability of profit of any structure most retail platforms show. It is also the structure where the gap between probability of winning and worth trading is widest, so it is worth doing the arithmetic before the appeal takes hold.
Four legs, same underlying, same expiry. It is two credit spreads sold at once:
The two short strikes define the range you are being paid to stay inside. The two long strikes cap what happens if you leave it.
The structure is delta-neutral by intent rather than directional: you are not predicting where the stock goes, only that it does not go far.
The stock can only finish on one side of the range. If it closes below the put wing, the call wing expires worthless, and the reverse at the top. Both wings cannot lose.
That has a direct consequence: you collect two credits but only ever risk one width. The capital requirement is the width of a single wing less the total credit, and a broker will margin it that way. It is the reason an iron condor is more capital-efficient than running the two spreads at different times, and it is the single most useful thing to understand about the structure.
Illustrative numbers, chosen to be round.
A stock trades at $100. You sell:
| Leg | Strike | Credit or debit |
|---|---|---|
| Sell put | 90 | +$1.05 |
| Buy put | 85 | −$0.45 |
| Sell call | 110 | +$0.95 |
| Buy call | 115 | −$0.40 |
| Net credit | +$1.15 |
So $115 collected per condor, with both wings $5 wide.
So you profit on any close between $88.85 and $111.15, a band roughly 22% wide, which is why the probability of profit on a condor like this often prints in the high seventies or low eighties.
Every defined-risk trade has a break-even win rate, and it is arithmetic rather than a model output:
break-even win rate = max loss ÷ (max loss + max profit)
For the condor above: 385 ÷ 500 = 77%.
| Probability of profit (typical for this shape) | ~80% |
| Break-even win rate | 77% |
| Margin | ~3 points |
Three points is a thin edge, and it is thinner than it looks, because the probability figure comes out of a volatility assumption and the 77% does not. Change the volatility input and the 80% moves; the 77% stays exactly where it is. The whole case for the trade sits inside the difference between a modelled number and a fixed one, which is the argument made at length in what probability of profit measures and how far to trust it.
This is not a reason to avoid condors. It is the reason that ranking them by probability of profit — which is how most screeners sort — ranks them by the half of the calculation that cannot fail the test.
The payoff shape is not symmetric and the experience of trading it is not either. A winning condor returns the credit, which is a fraction of the width. A losing one can return the whole width less that credit.
In the example: $115 when it works, $385 when it does not. You need better than three wins per loss, and that is before any cost of closing early.
The effect over time is the familiar premium-selling pattern: many quiet months, then one that undoes several. Most of the year will look like the strategy working. The arithmetic is settled by the months that do not.
Doubling both wings from $5 to $10 roughly doubles the credit and roughly doubles the max loss. The return on risk barely moves.
So width is a sizing decision, not a yield decision. Treating a wider condor as a richer trade is how positions quietly become too large: the credit on the ticket grows, the number of contracts stays the same, and the worst case doubles without anyone deciding that it should.
It fits in a liquid underlying where all four strikes have real quotes, in an expiry that clears any scheduled event, when implied volatility is elevated relative to how much the stock has actually been moving, and at a size where a maximum loss would be unremarkable.
It does not fit through an earnings report. The structure is a bet against a large move, and an earnings date is the market's own statement that a large move is plausible. The premium is higher for exactly that reason, which is a payment for the risk rather than a mispricing — the same point trading options around earnings works through in detail.
It also does not fit in an illiquid name. Four legs means four bid-ask spreads on the way in and potentially four on the way out. A $0.05 spread per leg is $20 of friction on a $115 credit, and that is before the trade has done anything.
The Iron Condor screener shows the credit, the capital at risk, the return on that capital and the probability together, so both halves of the calculation stay visible. The Bull Put Spread screener covers the lower wing on its own, which is the simpler trade to learn the mechanics on.
None of this is advice about a specific position. The one habit worth taking from it is the division: work out the break-even win rate before you look at the probability, so the probability has something to be measured against.
Because the stock can only finish on one side. If it closes below the put wing the call wing expires worthless, and the reverse at the top. The maximum loss is the width of the losing wing less the total credit collected from both. This is also why a broker charges margin on one side rather than both.
The question is better asked the other way round. Work out the break-even win rate first, which is max loss divided by max loss plus max profit, and then compare the platform's probability against it. A structure showing an 80 percent chance of profit that needs 84 percent to break even has a negative expectation regardless of how comfortable the 80 looks.
Usually yes, and for a practical reason rather than an elegant one. Equal widths make the max loss identical whichever side is breached, so there is one number to size against. Unequal widths mean your worst case depends on which direction the stock moves, which is harder to hold in your head when you are deciding how many to sell.
The short option is assigned and the long one is not, which leaves you with a stock position you did not plan. On the put side that means shares; on the call side it means short shares. Most brokers close positions at risk of this near expiry, but it is the trader's responsibility and it is the main reason not to hold a breached condor into the final hours.