Iron condors explained
An iron condor is a put credit spread and a call credit spread sold at the same time on the same underlying. You collect both credits, and because the stock can only finish in one place, you can only lose on one side. That is why $400 of combined width risks $145 rather than $290.
Sell an out-of-the-money put spread. Sell an out-of-the-money call spread. Same stock, same expiry. Done.
The trade
DKNG at $38.40, September 19, 45 days out, on the same chain as everything else in this series.
| Leg | Action | Price | Delta | Cash |
|---|---|---|---|---|
| $32 put | buy 1 | $0.37 | -0.111 | -$37 |
| $34 put | sell 1 | $0.64 | -0.184 | +$64 |
| $43 call | sell 1 | $0.51 | 0.205 | +$51 |
| $45 call | buy 1 | $0.23 | 0.111 | -$23 |
| Net | $0.55 | 0.021 | +$55 |
- Credit: $55.
- Width: $2 on each side.
- Maximum loss: $200 minus $55 = $145. Not $290.
- Break-evens: $33.45 and $43.55.
- Return on risk: 37.9 percent in 45 days.
- Profit zone at expiry: anywhere from $34 to $43, which is a 23.4 percent band.
Why the risk does not double
This is the only genuinely free thing in the structure and it is worth being clear about.
DKNG finishes at one price. If that price is below $34, the put spread loses and the call spread expires worthless. If it is above $43, the reverse. There is no path where both sides pay out, because the stock cannot be in two places on September 19.
So you took $400 of combined width, you are exposed to $200 of it, and you were paid the credit from both sides. Two spreads, one risk, two premiums. That is the entire argument for the structure and it is a good one.
Compare the two halves separately: the call spread alone pays $28 against $172 of risk, which is 16.3 percent. The condor pays $55 against $145, which is 37.9 percent. The put spread came almost free.
Where it ends up
| DKNG at expiry | Result | P and L | Odds |
|---|---|---|---|
| Below $32 | put spread at full width | -$145 | 9.3% |
| $32 to $33.45 | losing on the put side | -$1 to -$145 | 6.7% |
| $33.45 to $34 | short put in the money, still ahead | +$1 to +$54 | 3.1% |
| $34 to $43 | all four expire worthless | +$55 | 61.6% |
| $43 to $43.55 | short call in the money, still ahead | +$1 to +$54 | 2.5% |
| $43.55 to $45 | losing on the call side | -$1 to -$145 | 5.4% |
| Above $45 | call spread at full width | -$145 | 11.4% |
Keep the whole credit 61.6 percent of the time. Finish somewhere profitable 67.2 percent of the time. Take a maximum loss on one side or the other 20.7 percent of the time, which is one trade in five.
Run it eight times a year and the odds of getting through twelve months without a single maximum loss are about 16 percent. That is the arithmetic cluster H runs on a single short call and it is worse here, because there are two ways to lose.
The cost nobody puts in the table
Two short strikes means two things that can be tested, and testing is what makes people close trades badly.
At a single 38.4 percent volatility, DKNG touches $34 at some point before expiry 37.6 percent of the time and touches $43 39.2 percent of the time. Simulating paths that can do either puts the odds of at least one side being tested at roughly three in four.
Read that against the 61.6 percent full-profit figure. Most trades work. Most trades also frighten you first, and on a structure with a short strike in each direction the frightening happens twice as often as on a single spread. The gap between finishing somewhere and going there is the most underrated number in premium selling and the iron condor doubles your exposure to it.
The wings also cost more than they look. The naked strangle, short the $34 put and the $43 call, collects $115. The two long wings cost $60. That is 52.2 percent of the gross credit, spent capping both tails, and like the single spread it is priced at fair value rather than sold to you cheaply.
What actually decides an iron condor
Three things, in order.
How wide the body is. The distance between the two short strikes is the trade. $34 to $43 here is 23.4 percent of the stock price and gives a 61.6 percent chance of a clean result. Narrow it by a dollar on each side and the credit goes up and the odds go down, quickly.
Whether volatility is high enough to be worth selling. A condor is a short volatility position with no directional view at all, so the only reason to put one on is that options are expensive relative to what the stock does. Which is a measurement problem with two standard answers that disagree.
Whether the underlying can gap. The condor's worst enemy is a jump: an earnings print, a trial result, a takeover. Nothing between the strikes protects you from waking up outside them, and a date inside the expiry is a veto rather than an input.
Honest comparison to what this site normally recommends
An iron condor and a cash-secured put are not competing versions of the same idea.
The put is a promise to buy a company you want at a price you like, and being wrong leaves you holding shares. The condor has no company in it. Being wrong leaves you with $145 less and nothing to hold, no basis, nothing to wheel, and no version of the story where waiting fixes it.
What it buys you is that $145 is the whole answer, decided in advance, on $145 of capital. The cash-secured put version of a similar view ties up $3,400 and can lose far more than $145. Different trades. The condor is the one you use when the capital is the constraint and the shares were never the point.
Spreads need a higher options approval level than covered calls or cash-secured puts at most brokers, and they are multi-leg orders: two or four legs to fill on the way in and the same on the way out. Every price here is an illustrative worked example computed off one chain, not a quote.
OptionsKing scores every candidate strike on a deterministic 0 to 100 scale, blends that score with the return on the capital the trade ties up, and shows you the highest-ranked handful. There is no minimum score. How it works covers what the ranking does and does not tell you.
Questions people actually ask
What is an iron condor?
A put credit spread and a call credit spread sold at the same time on the same underlying and expiry. You collect both credits and can only lose on one side, because the stock finishes in one place.
Why is the maximum loss on an iron condor not the sum of both spreads?
Because both sides cannot lose. On the worked trade the two spreads are $2 wide each, $400 combined, but the maximum loss is $200 less the $55 credit, so $145.
What are the odds an iron condor works?
On the worked trade, 61.6 percent chance of keeping the whole $55 and 67.2 percent of finishing somewhere profitable, against a 20.7 percent chance of a maximum loss. The expected value, like every fairly priced option trade, is about zero.
Why do my iron condors feel worse than the win rate suggests?
Because there are two short strikes to be tested. Each side is touched roughly 38 percent of the time before expiry, and simulation puts the chance of at least one side being tested at about three in four, against a 61.6 percent chance of a clean result.
Sources
Rules and thresholds above were checked against these documents on August 4, 2026. Exchange and broker rules change. Confirm anything you are about to act on with your own broker.
Keep reading
Do the math on your own trade
Every price in this article is an illustrative worked example, not a quote. Read the Learn hub for the rest of the series, and the disclaimer before you act on any of it. Selling options carries real risk of loss, and the loss can be far larger than the premium you collected.