liveBook · Manning

Iron condor

As explained in Investing for Programmers

An iron condor is a defined-risk options strategy that combines short and long calls and puts to profit when the underlying asset remains within a specified price range.

An iron condor is a defined-risk options strategy for profiting when an underlying asset remains within a specified range. It expresses a bet on low volatility: sell an out-of-the-money (OTM) call and put, then buy farther OTM options to limit losses. section 7.4.1

Track the position as four option legs:

  • Sell an OTM call and an OTM put, collecting premiums while accepting obligations if buyers exercise. section 7.4.1
  • Buy an OTM call and an OTM put to hedge sharp upward or downward moves and cap maximum loss. section 7.4.1
  • Keep the collected premium when the asset finishes between the short strikes and both short options expire worthless. section 7.4.1

Range-bound ACME scenario

With ACME trading at $100, a European-style iron condor frames a range using short and long call and put strikes. The supplied example establishes the setup but does not provide the strikes or payoff calculation. section 7.4.1

How Investing for Programmers covers it

How deep it goes
Defines the legs, expiration condition, and hedge rationale but stops short of strike selection and payoff calculations.
Examples
Uses a European-style ACME position with the stock trading at $100, without specifying strikes.
What it assumes
Assumes basic option terminology while defining selling, buying, exercise, intrinsic value, and moneyness.
What you can do after
Evaluate how price stability, option premiums, and protective long options shape the strategy’s risk profile.
How it connects
Connects options, premiums, strike prices, out-of-the-money status, volatility, and credit spreads.
Cover of Investing for Programmers
liveBookmanning.com
Read Investing for Programmers on liveBook Get the book at manning.com

Related concepts

This explainer was generated by Manning's knowledge graph from the text of Investing for Programmers. The section links point to the parts of the book it draws on.