What it means
An iron condor combines a short put spread (sell higher-strike put + buy lower-strike put) and a short call spread (sell lower-strike call + buy higher-strike call). All four contracts same expiration. Net credit at entry. Maximum profit if underlying closes BETWEEN the short strikes at expiration; maximum loss = width of spreads minus credit, capped by the long protective options. Direction-neutral; profits from time decay and vol contraction.
Why it matters
Iron condors are the canonical institutional vol-selling structure for direction-neutral views. Better risk-reward than naked option selling (defined max loss) at the cost of lower premium captured. Standard structure for premium-selling income strategies; cleaner risk profile than straddles or strangles.
How to use it
Set short strikes at 1 standard deviation above and below current price (typically 16-delta on each wing). Long protective wings 5-10% further OTM. Enter when IV is elevated relative to realized vol (positive VRP). Manage profitable trades at 50% of max profit; cut losing trades at 1.5-2x credit received.
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