Iron condor profits when stock stays within a specific range
Image: Szaaman, Public domain, via Wikimedia Commons
Iron condor
Iron condor profits when stock stays within a specific range
The iron condor is a combination of a bull put spread and a bear call spread, both credit spreads. It profits from the stock price staying within a certain range, as it involves selling options with strikes closer to the current price and buying options with strikes farther away.
Example
If the stock price is between $50 and $60, and the iron condor is set with strikes at $45, $50, $55, and $60, the trader profits if the stock stays within this range.
Understanding this range is crucial for traders to manage risk and set appropriate stop-loss orders.
Related concepts
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Market capitalization
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Educational content, not financial advice.
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