📑 Table of Contents
- What is a Long Iron Condor?
- How the Strategy is Constructed
- Payoff Diagram with Explanation
- Examples using Stock & Index Options
- Advantages
- Risks
- FAQs for Beginners
- Final Thoughts
Long Iron Condor option strategy gives you the flexibility to design strategies for different market conditions. One of the most popular range-bound strategies is the Long Iron Condor. It is designed for traders who expect low volatility in a stock or index and want to earn limited profit with limited risk.
✅ What is a Long Iron Condor?
A Long Iron Condor is a non-directional options trading strategy that profits when the underlying stock or index remains within a specific price range.
It involves four option contracts with the same expiry but different strike prices:
- Buy 1 Out-of-the-Money Put (lower strike)
- Sell 1 Put (just below current price)
- Sell 1 Call (just above current price)
- Buy 1 Out-of-the-Money Call (higher strike)
This creates a “condor-shaped” payoff graph, hence the name.
👉 It’s called a long condor because you pay a small net premium to enter the trade.
⚙️ How the Strategy Works
- Maximum profit: Earned when the stock stays between the two middle strike prices (the sold put & sold call).
- Maximum loss: Limited to the net premium paid.
- Market outlook: Best for range-bound markets with low volatility.
📊 Payoff Graph of Long Iron Condor
Profit | ______ | / \ | / \ |-------------/ \----------- | / \ | / \ |_________/ \_______ Loss K1 K2 K3 K4
K1 = Lower Put Buy
K2 = Put Sell
K3 = Call Sell
K4 = Higher Call Buy
📌 Examples of Long Iron Condor
Example 1: Reliance Industries
Suppose Reliance is trading at ₹3,000. You expect it to remain between 2,950 – 3,050 till expiry.
- Buy 1 Put (Strike 2900) @ ₹10
- Sell 1 Put (Strike 2950) @ ₹25
- Sell 1 Call (Strike 3050) @ ₹25
- Buy 1 Call (Strike 3100) @ ₹10
Net Premium Paid = ₹20
Max Profit = ₹30
Max Loss = ₹20
Breakeven Points = 2930 and 3070
If Reliance stays between ₹2950 – ₹3050, you make a profit.
Example 2: Nifty 50 Index
Nifty is at 22,000. You expect no big move till expiry.
- Buy 1 Put (21,800) @ ₹30
- Sell 1 Put (21,900) @ ₹70
- Sell 1 Call (22,100) @ ₹70
- Buy 1 Call (22,200) @ ₹30
Net Premium Paid = ₹40
Max Profit = ₹60
Max Loss = ₹40
Breakeven = 21,860 and 22,140
This is ideal for traders betting on a sideways market.
⭐ Advantages of Long Iron Condor
- Limited risk and limited reward
- Works well in low volatility environments
- Profitable even if the stock/index moves slightly within the middle range
- Higher probability of profit compared to directional strategies
⚠️ Risks & Limitations
- Profit is capped (cannot earn unlimited gains)
- Loss occurs if the stock moves sharply outside the expected range
- Time decay (Theta) benefits sellers but hurts if the market moves out of range
- Requires careful strike selection and timing
❓ FAQs on Long Iron Condor
Q1. Is Long Iron Condor good for beginners?
Yes, it’s beginner-friendly since risk is limited and payoff is easy to understand.
Q2. When should I use this strategy?
When you expect low volatility and believe the stock/index will stay within a range.
Q3. Can I exit before expiry?
Yes, you can square off anytime before expiry if profit is achieved early.
Q4. What is the difference between a Long Iron Condor and a Short Iron Condor?
Long = Net debit, profits in low volatility. Short = Net credit, profits in high volatility.
Q5. Is a margin required for this trade?
Yes, brokers may block margin, but since both calls and puts are bought & sold, the margin requirement is usually lower than for naked positions.
🏁 Final Thoughts
The Long Iron Condor is a safe and systematic strategy for sideways markets. While profits are capped, the strategy provides peace of mind with limited risk. Traders who want a steady income from options with low volatility often rely on this strategy.
If you’re trading stocks like Reliance, Infosys, or indices like Nifty 50 or Bank Nifty, a Long Iron Condor can help you generate consistent returns when you don’t expect big moves.
