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Credit spread

As explained in Investing for Programmers

A credit spread is an options strategy that receives a net premium by selling options while buying other options to limit potential loss.

A credit spread receives a net premium by selling options and buying cheaper options for protection. The long options cap losses if the underlying moves sharply. section 7.4.1

An iron condor applies credit spreads on both sides: sell an out-of-the-money call and put, then buy farther out-of-the-money options. The position profits when price remains within the short strikes. section 7.4.1

ACME iron condor

With ACME at $100, sell the $120 call and $80 put, then buy the $130 call and $70 put. If price stays between $80 and $120 at expiration, both short options expire worthless and the net credit is the maximum profit. If price falls to $20, the $70 put limits the short-put loss to $10 per share before subtracting the credit. section 7.4.1

How Investing for Programmers covers it

How deep it goes
Explains construction, maximum profit, assignment, and capped loss through one expiration example.
Examples
Uses an ACME iron condor with $70, $80, $120, and $130 strikes, including a $20 expiration scenario.
What it assumes
Assumes basic option terminology while illustrating strike prices, expiration, in-the-money status, and assignment.
What you can do after
Evaluate a defined-risk iron condor by identifying its credit, profit range, assignment exposure, and maximum loss.
How it connects
Ties options to iron condors, strike prices, expiration, assignment, premiums, and in-the-money exercise.
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