11.42Iron Condor
1What is it?
Sell an OTM put and an OTM call, and buy further-OTM put and call for protection (four legs).
2Why does it exist?
When it is used: You expect the index to stay within a range until expiry (low volatility).
3Diagram
Max profit
₹5,525
Max loss
₹13,975
Breakeven
₹24,615 / ₹25,385
4Calculation
- Collect 85 points net.
- Expiry between 24,700 and 25,300 → keep ₹5,525.
- Expiry beyond either wing → lose ₹13,975.
- Maximum profit: Net credit: (60 + 70 − 20 − 25) × 65 = 85 × 65 = ₹5,525
- Maximum loss: (Wing width − credit) × lot = (300 − 85) × 65 = ₹13,975
- Breakeven: 24,615 and 25,385
5Risks
- Limited-risk position: the most you can lose is known in advance.
- Premiums shown are hypothetical; real premiums depend on volatility and time to expiry.
6Quick revision
- Max profit: Net credit: (60 + 70 − 20 − 25) × 65 = 85 × 65 = ₹5,525
- Max loss: (Wing width − credit) × lot = (300 − 85) × 65 = ₹13,975
- Breakeven: 24,615 and 25,385
7Knowledge check
Q1. Market view for an iron condor?Show answer
Range-bound / low volatility.
Q2. Why buy the outer options?Show answer
To cap the loss (limited risk).
Q3. Is max profit larger than max loss here?Show answer
No. Small frequent gains, occasional bigger losses.
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